Higher forecasts: A light installation is projected onto the ECB building in Frankfurt. The central bank’s latest economic projections show inflation hitting 3.2% this year. — AFP
FRANKFURT: The European Central Bank’s (ECB) inflation forecasts may need to be revised upward because of the continent’s attempts to cut carbon emissions and transition to green energy, executive board member Isabel Schnabel said.
“In an environment of large excess savings and protracted supply disruptions, the energy transition may lead to inflation remaining higher for longer, thereby potentially raising the risks of inflation expectations destabilising,” Schnabel said in a speech to the American Economic Association on Saturday, adding that the ECB would need to act in such a scenario. The comments come after data on Friday showed inflation unexpectedly accelerated to 5% in December, setting a record in the history of the common currency. That complicates the ECB’s central thesis that the surge in prices in recent months will fade as supply tensions unwind and energy costs cool.
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