The pandemic had affected the economy in the euro area. The ECB President now says that the shock has not yet been fully digested. She sees a temporary effect in the rise in consumer prices.
The economy in the euro area has not yet fully digested the corona shock, according to Europe’s monetary authorities. “The economy has bottomed out, but is not quite over the top yet”.
This was said by the President of the European Central Bank (ECB), Christine Lagarde, at the start of the annual ECB central bank conference, which this time was held as an online event.
The rapid upswing after the end of the corona restrictions also explains the comparatively strong increase in inflation rates recently. What can currently be observed is “above all a phase of temporary inflation in connection with the reopening,” said Lagarde.
From the point of view of the ECB, the increase in consumer prices is temporary and due to special factors as a result of the Corona crisis. For example, crude oil prices collapsed due to low demand on the world market after the outbreak of the pandemic in spring 2020. They have since recovered. The return to the usual VAT rates in Europe’s largest economy, Germany, on January 1, 2021 also had an effect on inflation in the euro area.
“In fact, the low inflation rate last year and the high inflation rate this year on average correspond to the inflation rate that was observed in 2019 before the pandemic,” said Lagarde. The price level is therefore roughly as if inflation had stayed at its pre-pandemic level.
The central bank has recently been aiming for an annual rate of inflation of two percent for the euro area and is at least temporarily ready to accept a moderate rise or fall below this mark. A supportive monetary policy course is still needed, “in order to safely overcome the pandemic and sustainably reduce inflation to two percent,” affirmed Lagarde.
Jane Stock is a technology author, who has written for 24 Hours World. She writes about the latest in technology news and trends, and is always on the lookout for new and innovative ways to improve his audience’s experience.
