The chief economist of the European Central Bank says the rise in producer prices in the euro zone is not an inflation risk
The chief economist of the European Central Bank said that the recent surge in producer prices due to supply chain disruptions is “almost zero linked” to underlying economic trends, and does not mean that rising inflation is a threat.
Philip Lane said in an interview: “For example, there is a shortage in the semiconductor field, and certain transportation routes have restrictions. Of course, when you encounter an unplanned bottleneck, there will be some price action, but this is not Not inflation,” Internet Conference Thursday.
His remarks are by far the most powerful sign that the European Central Bank is determined to maintain an ultra-loose monetary policy, despite The possibility is getting bigger Eurozone inflation will reach its target later this year due to the cancellation of coronavirus containment measures and the group’s economy rebounded from last year’s historic recession.
The Council of the European Central Bank is expected to discuss the prospect of slowing down its bond purchases to reflect the improved economic outlook when it meets next month. However, Ryan said that there is still a lot of work to be done to achieve the goal of controlling the inflation rate to slightly less than 2% in the next few years.
The inflation rate in the euro area rose to 1.6% in April after several months below zero at the end of last year. Many economists predict that the inflation rate in the euro area will rise to more than 2% this year. But the European Central Bank predicted in March that it would fall back to 1.4% by 2023.
Lane said: “It is the level, not the recent changes, because when you climb out of a hole, you are still in a hole.”
Shortly after data showed that German producer prices rose 5.2% from the same period last year in April (the highest in nearly a decade), he made the above remarks driven by double-digit increases in metal, wood and energy prices, which offset the decline in food prices. Impact. price.
According to IHS Markit’s monthly survey of purchasing managers, the EU’s manufacturing input prices increased at the fastest rate in a decade in April, pushing up output prices at the fastest rate since the record set in 2002. According to reports, this is the largest increase in input prices since the start of the data series in 1992 for builders, car manufacturers and basic material manufacturers. The prices of machinery and equipment manufacturers have also hit a record high.
The survey showed that the EU’s service industry also reported rising input prices, but at a much slower pace and had no effect on output prices. Companies in hard-hit areas such as consumer services report that output prices have fallen, especially in the tourism and leisure sectors.
Lane said that the recent rebound in inflation was mainly due to “the reversal of what we saw last year”, because when the pandemic broke out in the spring of 2020, the sharp drop in oil prices “has now been lifted.”
But he played down the impact of supply bottlenecks, which made it difficult for manufacturers to deal with Shortages and soaring prices In many raw materials. He said: “This is just a relationship between supply and demand. We know that when the price spikes, the supply tends to respond.” “Today, the price of PPE masks is very different from a year ago.”
Lane added: “When the world economy reopens, the link between any price spike and inflationary trends is almost zero.”
He said that in Europe and the United States, two-thirds of the inflation index is based on service prices, not manufacturing. “When you consider the reasons for service inflation, it is basically the labor market. In the United States and Europe, the labor market is out of reach, and there is no prospect of an ultra-fast rebound.”
Lann warned that the European Central Bank should “consider from a medium-term perspective and not confuse the reopening of the economy with the new golden age” and pointed out that the unemployment rate in the euro zone is not expected to reach pre-pandemic levels until 2023.