ECB’s de Cos: We Don’t See Any Kind of Inflationary Pressures

11 May 2021

By David Barwick – FRANKFURT (Econostream) – Despite the short-term volatility of inflation in the euro area, there is no inflationary pressure, European Central Bank Governing Council member Pablo Hernández de Cos said Tuesday.

Speaking at an event at a university in Spain, de Cos, who heads Banco de España, said that the key aspect of inflation from a monetary policy standpoint was ‘the degree of transitoriness of the inflationary increase’.

Although ‘inflation could even exceed 2% at some points of the year’ in 2021, he said, ‘we do not see any kind of inflationary pressures’, and the ECB’s medium-term HICP forecast of 1.4% ‘is very far’ from the price-stability objective.

‘We do not see inflationary risks, at least in the European case’, he said.

Just like the US Federal Reserve in its strategy review, ‘it would be a possibility’ for the outcome of the ECB’s strategy review to include an explicit tolerance of temporarily above-target inflation after a lengthy period of low inflation, he said.

The future depended on the evolution of the pandemic, which is why ‘since October, when we learned that there were some vaccines that were effective, expectations improved clearly’, he said.

Economic setbacks since then thus had to do with snags in the production and distribution of the vaccines, he said. ‘But now I think that we all have the feeling that once these bottlenecks have diminished, then the expectations are clearly that not just the Spanish economy but also the European and world economy will improve in a significant way in the next quarters.’

There is nevertheless uncertainty, he said, with regard to the pandemic itself and in particular virus mutations. Moreover, the extent of Spain’s economic recovery depends on the impact of European funds as well as what happens with the ‘very significant forced savings’ accumulated during the last quarters.

‘But with all these uncertainties, I insist that at the moment, if the distribution of the vaccines accelerates in the next weeks, it would be normal to expect in effect that the European and world economy, and of course the Spanish economy also, start to experience positive, relatively vigorous economic growth in the next quarters’, he said.