How Euro-Area Inflation Could Overshoot 2% in 2023
(Bloomberg) -- European Central Bank Governing Council member Pierre Wunsch just said that it “won’t take much” for euro-area inflation to hit 2% in 2023 and research by Bloomberg Economics shows that there are plenty of ways to get there. One plausible scenario is that the domestic and global recoveries proceed faster than expected in the second half of next year, oil prices climb and inflation expectations pick up a touch: Running a 1% boost to global GDP, a 0.5% lift to domestic demand, a $30 jump in oil prices and a 0.25 percentage point increase in inflation expectations through BE’s in-house model shows inflation might be 2.1% on average in 2023. The model suggests the drift in expectations and stronger demand outlook would cause ECB policy makers to bring the timetable for withdrawing stimulus forward.
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