Brussels (Brussels Morning) European Central Bank (ECB) President Christine Lagarde says the ECB expects inflation to stabilise in 2022.
Interviewed by CNBC on Friday, she said many of the causes of rising inflation in the eurozone are temporary and predicted that would fade next year, Reuters reports.
Prices in the eurozone have been rising faster than analysts expected as countries lifted restrictions and their economies reopened. Several ECB officials expect inflation to reach or slightly exceed the bank’s target of 2% in 2022.
“We think that there will be a return to much more stability in the year to come because many of the causes of higher prices are temporary,” Lagarde noted as she reiterated that inflation should stabilise next year.
Lagarde blames supply chain disruptions
She cited supply chain disruptions as being largely to blame for the inflationary spike, adding that “when you look at what’s causing it, a lot of it has to do with energy prices.”
Lagarde was confident that “things will fall into place” once new supply chains are established, but she warned that energy prices could remain high due to the green push and the move away from fossil fuels.
Noting that the number of registered unemployed in the eurozone is approximately one million higher than before the coronavirus crisis, she said here expectation was that a decline in unemployment would make an impact on inflation.
Lagarde pointed out that the ECB had started tapering its emergency bond purchases earlier this month. However, she also indicated that she plans to maintain expansionary monetary policy for the coming period.
She contrasted this approach with that of the the US Federal Reserve System, which earlier this week announced plans to start scaling back its bond purchases soon.
Commenting on the trouble the embattled Chinese property developer Evergrande is facing, Lagarde noted “in the euro area, in particular, direct exposure would be limited.”