Euro-Area Inflation May Stay High for Longer, Dutch Warn
The Dutch central bank warned that high euro-area inflation could persist for longer than so far expected, according to a report published on its website.
“Factors -- such as consumers’ pent-up demand, supply-chain bottlenecks and rising prices for energy and other commodities -- while also ultimately transitory in nature, now appear likely to persist longer than initially thought,” the bank said. “The longer the current high inflation persists, the higher the risk that it becomes embedded in the behavior of households and firms, thereby generating ‘second-round effects.’”
The report comes just weeks before a key European Central Bank meeting at which officials are set to plot a course away from crisis-support measures. The current inflation environment could “allow the ECB to phase out some of the most intrusive monetary-policy instruments,” the Dutch central bank said.
“For the last eight years, we have in vain conducted a kind of rain dance to get some more inflation -- now the pandemic suddenly results in higher inflation,” ECB Governing Council member Klaas Knot, who heads the Dutch bank, told Nieuwsuur TV on Monday evening in an interview.
“The interesting question is: the factors that lead to temporarily higher inflation, how temporary are they?” he said. “If that will take longer than we think, we as central bankers will have to react.”
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