ECB’s Vasle: Increasing Risks That Inflation Will Stay High Longer

4 February 2022

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Boštjan Vasle on Friday warned of a growing threat that inflation would stay elevated for longer than had been anticipated.

In a statement issued in his name by the Bank of Slovenia, which he heads, Vasle said that ‘[t]he outlook for a moderation [of inflation] in the coming quarters is accompanied by increasing risks that it will remain at higher levels for longer.’

‘Rising energy prices and continuing bottlenecks in supply chains suggest that price growth, although expected to slow further over the course of this year, could persist at elevated levels for longer than expected’, he said. ‘Although the main contributors to high inflation continue to be strong energy price inflation, broader inflationary pressures also remain elevated.’

The ‘gradual’ reduction of asset purchases decided in December is continuing, but ‘[a]t the same time, monetary policy needs to maintain a sufficient degree of flexibility to respond in a timely manner to signs of sustained inflationary pressures’, he said. ‘The members of the Governing Council are therefore ready to adjust all monetary policy instruments, if necessary, in order to stabilise inflation at the 2% target in the medium term.’

The ECB has ‘the ability to react quickly to any change in the situation’, he said.

Vasle was optimistic that economic growth would rebound following the short-term deceleration due to the pandemic.

‘Thus, despite a temporary slowdown in economic activity, we estimate that the continuation of the post-pandemic recovery is not at risk and growth is expected to pick up later in the year’, he said.