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28 September 2021

ECB's зresident Lagarde: Monetary policy should normally “look through” temporary supply-driven inflation, so long as inflation expectations remain anchored

  • Eurozone economy is back from brink, but not completely out of woods
  • Euro area is going through a highly atypical recovery
  • Atypical recovery is leading to rapid growth, but also to supply bottlenecks appearing unusually early in economic cycle; it is also causing inflation to rebound quickly as economy reopens
  • We are monitoring developments carefully but, for now, we see no signs that this increase in inflation is becoming broad-based across the economy
  • Wage developments so far show no signs of significant second-round effects
  • Inflation expectations also do not point to risks of prolonged overshooting
  • Looking beyond the pandemic, we expect inflation to only slowly converge towards 2%
  • Employment is now recovering quickly, but we have so far observed that labour force participation is rising even faster
  • We expect unemployment to fall below its pre-crisis level only in Q2 2023, and wages to grow only moderately
  • Our monetary policy will continue to provide conditions necessary to fuel the recovery
  • Once the pandemic emergency comes to an end, our forward guidance on rates as well as purchases under asset purchase programme will ensure that monetary policy remains supportive of timely attainment of our medium-term 2% target

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