- ECB's president Lagarde: Outlook for inflation over medium term remains subdued
Market news
22 July 2021
ECB's president Lagarde: Outlook for inflation over medium term remains subdued
- Pandemic continues to cast a shadow, especially as delta variant constitutes growing source of uncertainty
- Delta could dampen the recovery, particularly in services
- Inflation has picked up, although this increase is expected to be mostly temporary
- We expect manufacturing to perform strongly, even though supply bottlenecks are holding back production in near term
- Delta variant could dampen recovery in services
- We expect economic activity to return to its pre-crisis level in Q1 2022
- But there is still long way to go before the damage to the economy caused by pandemic is offset
- There are still 3.3 million fewer people employed than before the pandemic
- We expect inflation to increase further over coming months and to decline again next year
- Current increase is largely being driven by higher energy prices and by base effects from sharp fall in oil prices at the start of pandemic and impact of temporary VAT reduction in Germany last year; the impact of these factors should fade out by early 2022
- We see risks to economic outlook as broadly balanced
- Our policy measures, including our revised forward guidance, will help the economy shift to solid recovery and, ultimately, bring inflation to our 2% target
- We want to see at least 2% inflation well-ahead of our projection horizon
- We want durable 2% inflation
- Inflation cannot be below 2% for rates to rise
- No one wants to tighten prematurely
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