Bank of Italy has significantly revised upwards its estimates on inflation in Italy for 2022: it now expects an acceleration in inflation measured by the consumer price index from + 1.9% this year (revised upwards from + 1.5% estimate in the economic projections of last July) to + 2.8%, compared to the + 1.3% previously forecast.
In the note announcing the update of the outlook, Palazzo Koch motivates the maxi upward revision “mainly” with “the effects of the rise in energy prices, which would run out towards the end of next year”.
For 2023, the figure is expected to slow down to 1.5% (in any case higher than 1.3% of the July estimates), while for 2024 the forecasts are for an inflation rate of 1.7%. .
Core inflation in 2021 was also revised upwards from the + 0.5% previously expected to + 0.8%; that for 2022 is estimated to grow by 0.9% (from + 0.6% of previous estimates); that for 2023 is now expected at 1.4% from the previous 1.1%), while for 2024 core inflation, net of energy and food prices, is estimated at 1.6%.
Just yesterday, in the press conference following the announcement of the rates – left unchanged – by the ECB, Christine Lagarde announced the new estimates on Eurotower inflation which foresee, in fact, a sharp rise in prices in 2022.
For 2021, the inflation outlook was raised from the previous increase of 2.2% to + 2.6%, while for 2022 it went from an increase of 1.7% to + 3.2%. A maxi upward revision.
The new Bank of Italy report states that, “in line with the hypothesis of a gradual decline in the prices of energy raw materials, inflation would fall to 1.5 per cent in 2023 and rise to a limited extent the following year, to 1.7 per cent, reflecting the gradual acceleration of wages and the reduction in the margins of spare capacity “.
Bank of Italy specifies that “this scenario is heavily dependent on the hypotheses on the evolution of the pandemic and on the effects of the support measures, including those included in the PNRR (by Draghi). A deterioration of the epidemiological situation compared to the hypothesized one could determine greater limitations to mobility and negatively affect consumer and business confidence, hindering the recovery of economic activity. The projections also remain conditional on the full and effective implementation of the measures envisaged by the PNRR. Additional risk factors are connected with the intensity and duration tensions on the supply side and with the possibility of a less favorable trend in growth and world trade. Inflation could be higher than expected if energy prices remain at high levels for longer than assumed and if the transmission to the wage dynamics of the recent one was greater strong increase in consumer prices “.