ECB’s Müller: Inflation Danger Not Yet Over; Services Inflation ‘Cause for Concern’

13 September 2024

By David Barwick – FRANKFURT (Econostream) – The threat of high inflation has not yet passed in the euro area, where elevated price growth for services remains a worry, European Central Bank Governing Council member Madis Müller said Friday.

In a blog post on the website of the Estonian central bank, which he heads, Müller said that inflation was slowing and that it was increasingly believed that the high inflation of recent years was ‘becoming a thing of the past’.

Recognition of this motivated Thursday’s decision by the ECB to cut interest rates, he said.

Euro area inflation last month was, at 2.2%, ‘already quite close’ to the ECB’s price stability target, he said. ‘In this way, one could ask whether the danger of a too-fast price increase is over for the time being and inflation is within the bounds of statistical error, compared to the central bank's target’, he said.

‘However, we are not in such good shape yet’, was his answer. It was ‘quite likely’ that inflation would soon reaccelerate due to base effects, while services inflation at more than 4% ‘is a cause for concern in the outlook.’

Notwithstanding expectations of economic improvement, the current situation was ‘rather mediocre’, he said.

‘The acceleration of economic growth in the euro area will probably be quite moderate, but the conditions for economic improvement still exist - the demand for goods and services in the euro area is gradually increasing in the export markets, and hand in hand with the improvement of people's purchasing power, consumption is expected to recover as well’, he said.