The European Central Bank cut its inflation forecast on Thursday, but figures still point to price growth above its 2% target for the next few years, suggesting a prolonged period of tight monetary policy.
The ECB has raised interest rates by a total of 3.5 percentage points since July to combat a record rise in inflation, and further interest rate action is still likely as price growth is proving much faster. persistent than expected.
Adding to inflation concerns, the ECB also raised its forecasts for underlying prices, which exclude volatile food and fuel costs, indicating that price growth is likely to hold up, in part driven by relatively rapid growth of nominal wages.
Wages are still growing slower than inflation, but recent wage deals of between 5% and 6% are inconsistent with 2% price increases, so the ECB will need to see more moderation in wage demands Next year.
The bank also raised its growth forecast for this year after the lockdown staved off a recession, a good high for jobs but also a problem for inflation as continued economic expansion in a tight labor market could continue to drive up prices and wage costs.
ECB now estimates GDP growth of 1.0%, 1.6% and 1.6% respectively for 2023, 2024 and 2025, up from 0.5%, 1.9% and 1.8% previously .
For inflation, the estimates are 5.3%, 2.9% and 2.1%, against previous projections of 6.3%, 3.4% and 2.3%.
Source: Terra
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