Dutch central bank director Klaas Knot said that inflation in the Eurozone could exceed expectations in the short and medium term. This soaring outlook further strengthens the European Central Bank's (ECB) emergency bond purchase until next March.
The sharp increase in inflation this year stems from many reasons. However, observers, including the International Monetary Fund, have warned that the price increase could last longer than expected and could last longer.
The risk of inflation is all on the rise again, Knot stressed. High inflation in the short and medium term is mainly related to bottlenecks in supply and pressure to pay domestic wages".
Mr. Klaas Knot argued that even if these price-up risks do not become a reality, the bank's basic forecast alone is certain enough to end the 1.85 trillion VND pandemic Emergency Procurement Program (PEPP).
"The ECB's current grassroots scenario is consistent with the end of the PEPP in March 2022. The upcoming data will also clarify how the risks surrounding the current level of inflation will play out," Knot added.
However, the bank's director did not seem much worried about the possibility of prolonged inflation. The above has eased some market concerns that prices will get out of control.
He argued that the inflation outlook has "returned to the right direction" and that market-based inflation expectations are driving price growth in line with the ECB's own 2% target.
The ECB has stressed its inflation target for most of the past decade, despite unprecedented stimulus measures, including abundant asset purchases, subsidized loans to banks and deep negative interest rates.
