Euro area inflation seen peaking at 4.2%

Bloomberg

Euro area inflation will be faster than previously thought this year and next before slipping well below the European Central Bank’s goal in 2023, according to economists polled by Bloomberg.
Consumer-price growth will peak at 4.2% late in the fourth quarter, above the previous prediction of 3.6%, according to the median forecast from the survey. A year later, the rate will drop by more than half to 1.6% — below the European Central Bank’s 2% medium-term target.
Among the currency bloc’s biggest economies, Spanish inflation — at 5.3% — is seen as the quickest at the end of this year’s final quarter.
Whether the spate of surging consumer prices proves transitory or longer-lasting is being hotly debated.
Central bankers can arguably disregard short-lived inflation pressure and maintain accommodative monetary policy to support the economy’s pandemic recovery. But entrenched price increases would amplify calls for higher interest rates.
ECB policy makers are due to recalibrate their stimulus in the coming weeks. While pandemic asset purchases will probably end as planned in March, there’s no consensus on what will happen to the conventional bond-buying plan — currently running at 20 billion euros ($23 billion) a month.
“The Governing Council faces a very tricky task at its December meeting, finding a balance between high current inflation readings and below-target medium-term inflation forecasts,” TD Securities said. “Of the major central banks, the ECB remains the most dovish, by a long shot.”