Core inflation in the eurozone has proved to be stable. After the recent decline in energy prices, inflationary pressures could slow down, as stated by Isabel Schnabel, a member of the Executive Board of the ECB, on Wednesday.
Headline inflation in the eurozone is declining rapidly. But the core consumer price index, which excludes volatile fuel and food prices, is still rising. It suggests that price hikes may be sustainable and hard to combat.
Isabel Schnabel, responsible for Market Operations at the ECB, said last year’s energy price surge had shaken the economy. Today, it will take time to bring it down.
The ECB’s representative noted that it adheres to a flexible position on reaching a 2% inflation target. The ECB does not intend to rush, so as not to worsen the economic situation.
Conservative policymakers keep saying core inflation is increasingly dependent on domestic factors, more expensive services in particular. They also raise concerns about salary growth, which is 5–6% behind inflation but remains inconsistent with the ECB’s 2% inflation target.
Although the ECB provided no guidance for its May 4 meeting, Philip Lane, Chief Economist, said more rate hikes would be needed if the recent financial market turbulence dissipates.
Since July, the ECB has raised its key interest rate by 350 basis points to 3%.
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