Isabel Schnabel, the German economist present on the board of the ECB as head of market operations, breaks the front of those who consider European inflation only temporary. According to his prediction, expressed Saturday evening with a speech at the American Finance Association’s annual meeting, the policies that are being put in place to favor the energy transition from fossil fuels to a low-carbon economy “They introduce important risks of upside to the basic inflation trajectory in the medium term”.
As known, with the rebound of the European economy following the most acute period of the coronavirus pandemic, energy prices have shot up, pushing inflation to 5% in December 2021, a record high for the eurozone. But the European Central Bank has kept intact its forecasts of an inflation rate of 2% by the end of 2022 and set up a recovery plan from the emergency purchases of securities on the market that will end at the end of the year and then eventually proceed with a hike. interest rates only in 2023.
But this scenario, Schnabel now says, could be questioned by the impact of the green energy transition that could keep energy prices higher for longer than expected. “There are times when central banks have to go beyond the prevailing consensus, monetary policy has to look at rising energy prices to ensure price stability over the medium term”Schnabel said.
https://www.repubblica.it/economia/2022/01/07/news/l_inflazione_tocca_il_5_nell_eurozona_ma_la_bce_non_alzera_i_tassi_di_interesse-333031021/
In the eurozone, natural gas prices have spiked in recent months, pushing the cost of electricity to 196 euros per megawatt in November, about four times the pre-pandemic levels. “While in the past energy prices have often gone up and down fast, now the need to fight climate change could mean that fossil energy prices can not only remain high but could also rise if we are to achieve the goals of the agreements. Paris”Schnabel also argued.
The German economist, who now expresses a different opinion from that prevailing on European inflation, has also been critical in the past of the massive interventions of the ECB’s purchases of securities on the market and which led to the central bank’s balance sheet swelling. with 4.7 trillion assets in its portfolio. Now that emergency program has been revised downwards, from 90 billion euros a month to 20 billion at the end of 2022, but the front is growing that believes the repayment plan is too slow and that a stronger policy would be needed to stop price growth which may not be just temporary, as the Fed and the Bank of England are doing.
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