ECB’s Vasle: Increasing Likelihood that Inflation Will Stay Above 2%

30 November 2021

ECB’s Vasle: Increasing Likelihood that Inflation Will Stay Above 2%

By David Barwick – FRANKFURT (Econostream) – The probability is rising that inflation will persist above the European Central Bank’s price stability target, ECB Governing Council member Boštjan Vasle said Tuesday.

‘Our baseline is that inflation will be below 2% at the end of our forecasting period’ Vasle, who heads the Bank of Slovenia, was quoted as saying in an interview with Politico. ‘But the likelihood that it will stay above 2% is increasing.’

‘We're already witnessing some pressures here, higher wage demands in parts of the euro area’, he said. ‘If these pressures will materialize, the decline of inflation will be smaller and not so fast as currently expected.’

Like other monetary policymakers, Vasle also urged that the ECB maintain optionality given the potential for developments to head different ways.

‘Given the increasing likelihood that inflation won't decline as fast and as soon as currently expected, big caution is needed regarding our policy instruments’, he said. ‘We must leave the door open if the situation evolves in either direction.’

According to Politico, Vasle said he’d be ‘supportive’ of a temporary post-pandemic emergency purchase programme (PEPP) increase in the ECB’s asset purchase programme (APP) for the sake of avoiding market turbulence, but that the outlook ‘doesn't call for additional, permanent increase of the APP.’