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ECB’s de Guindos By Reuters

© Reuters. FILE PHOTO: Luis de Guindos, vice-president of the European Central Financial institution, speaks throughout a Reuters Breakingviews occasion in New York, U.S., April 25, 2019. REUTERS/Brendan McDermid

FRANKFURT (Reuters) -The euro zone’s inflation spike is just not as transitory as earlier thought and worth development this yr is liable to exceeding projections, European Central Financial institution Vice President Luis de Guindos mentioned on Thursday.

Inflation hit 5% final month, the best on report for the 19-country forex bloc, however the ECB expects it again underneath its 2% goal in each 2023 and 2024, even with out coverage tightening, as one-off stress ease.

“Inflation is just not going to be as transitory as forecast just some months in the past,” de Guindos instructed a UBS occasion. “The evaluation of danger for inflation is reasonably tilted to the upside over the subsequent 12 months.”

He added that power prices are more likely to stay elevated whereas supply-side bottlenecks proceed to exert upward stress on costs.

Nonetheless, over the long term, dangers are nonetheless seen balanced, de Guindos mentioned, including that 2023 and 2024 inflation are each seen slightly below the ECB’s 2% goal.

Some policymakers are extra sceptical, nonetheless, and warned that inflation might keep above goal even additional out as wage coverage is more likely to regulate to increased worth development, making the surge extra sturdy.

Though power costs elevated in current weeks, de Guindos mentioned this didn’t essentially alter the inflation image.

“They don’t have an effect on a lot the projections we produced 3 weeks in the past,” he mentioned.

The Omicron variant of COVID-19 can also be unlikely to considerably change the expansion outlook, for now, he mentioned, including that European economies have tailored to dwelling underneath the pandemic.

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