ECB chief economist says February inflation numbers pointed to stronger-than-expected pressures from food-related costs and wage developments
“By bringing the key policy rates to a sufficiently restrictive level and fostering a period of below-trend growth through the dampening of demand, we will counteract above-target medium-term inflation pressures and also ensure that the prolonged phase of above-target inflation does not become embedded through a de-anchoring of inflation expectations,” Mr Lane said.
Mr Lane admitted the latest data gave rise to “a mixed picture”. While price pressures from the energy commodities were easing, food-related costs and wages remained strong, he said.The latest harmonised index of consumer prices showed inflation in the Irish economy unexpectedly rose to 8 per cent in February. That fed into a headline rate for the euro zone of 8.5 per cent in February, down fractionally from January’s 8.6 per cent but above earlier expectations of a more significant decline.
More worryingly, core inflation, which strips out energy and food prices , rose from 5.3 per cent to 5.6 per cent, a record for the euro zone, and a reading that will underpin expectations of higher interest rates.The ECB is expected to opt for another half point bump in rates this month, bringing its main refinancing rate, the one that affects mortgages, to 3.5 per cent, up from zero per cent last July. It will also publish its latest inflation forecasts out to 2025.
“Compared to the peaks during the reopening phase of last year, the latest observations point to weaker pressures from the energy commodities, non-energy and non-food commodities, global and domestic economic activity and supply side bottlenecks,” Mr Lanw said.“By contrast, stronger pressures are indicated by the indicators for food-related costs and labour market developments, in particular from the tight labour market and from wage growth,” he said.
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