The European Central Bank (ECB) raised its inflation projections this week and slashed its 2022 growth outlook, saying the pandemic and supply chain disruptions are slowing the eurozone's economic recovery.
The regulator now sees inflation above its 2% target this year and in 2022 but holding below it in the following two years. The forecast is in line with its previous guidance for the current inflation “hump” to be longer than expected but still largely transitory.
As for the coming year, ECB said inflation will soar “significantly higher” to 3.2%, well above the 1.7% projected in September. It will fall back in 2023 to 1.8%, the central bank added.
Risks to growth remain “broadly balanced,” according to ECB President Christine Lagarde.
She said restrictions introduced in response to a surge in coronavirus infections had “moderated” the region’s economic growth in the final quarter of this year. Lagarde added that the slowdown had delayed by several months the expected recovery of the eurozone economy to its pre-pandemic level until the first quarter of next year.
The ECB lowered its growth forecast for next year to 4.2% but raised it to 2.9% for 2023. It has also decided to curtail its huge crisis stimulus, announcing that the €1.85 trillion ($2.2 trillion) pandemic-response program will end net purchases in March.
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