Wednesday, December 7

The ECB begins to take inflation seriously

Although the king has been naked during all this time, the central bankers continued to see him not only dressed but also in a full-fledged tuxedo. The much-touted transitory nature of inflation that has been applying has not been recognized nor by the president of the FED Jerome Powell, until it has not been disrupted at maximum levels of 7% in the United States.

Not to mention the conjunctural and structural situation, the central banker, in that very diplomatic language of the monetary institution, coined “transience” as the middle ground between inflation at stratospheric levels and that touches everything, from salaries to business costs to the very day-to-day of citizens, which has come to stay and exhaust our purchasing power in an increasingly forceful way, the structural form, and the relative and conjunctural one that is established for a certain period and then abandons us.

However, the upward path of the IPC is so sustained that it had no other choice, given what was going to be the imminent announcement of a rate hike, even more hawkish than expected, but to recognize its importance and sustained presence in the time to even, with the minutes now of the last meeting in hand, make analysts like Goldman Sachs see not just one rate hike imminent in March, but as many as four in 2022 alone, as they also predict from JPMorgan and Deutsche Bank.

But at the ECB, it is enough to look at the press conference in mid-December, the last one on monetary policy in the institution, to verify the same speech as always on inflation: Although the forecasts for 2022 were raised to 3.2%, the lyrics and music were the same. That it would be above 2% this year but that they expected a reduction throughout the year after normalizing consumption patterns and price pressures derived from global supply bottlenecks.

And it is that then it was still thought that In the Eurozone, inflationary pressures were not as pressing a problem as in the United States. and the UK as stated by Philip Lane, the chief economist of the ECB.

Data on inflation in the eurozone in the last month

But now we have and the prices at 5% and 2.8% excluding the much brought energy. And it is at this moment that they begin to recognize their impact. And of course, it has started where always, by the Bundesbank. Its new president Joachim Nagel already warned at his inauguration on higher inflation for longer than expected. And meanwhile, Christine Lagarde, the president of the ECB, to maintain the type, coined the “We do not take that concern lightly, but very seriously, with the unwavering commitment to price stability”. No more no less.

Statements that have already become a mantra, because three days after pronouncing them in Frankfort, he did so in Paris last Friday, indicating that he takes inflation very seriously, which he hopes will go down throughout the year, without going off the script. . And it is that The growing popular concern in the countries regarding the increase in the cost of living has reached the high tower of the ECB, although much later than expected.

Evolution of inflation in the eurozone

Looking at the ground that, just one day before and in a colloquium organized by UBS, recognized the number two of the institution, the Spaniard and Vice President of the ECB Luis de Guindos, indicating that maybe, in a clear acknowledgment, inflation is not as transitory, which it does not seem to be, as had been expected. There is no more to look in our pockets.

And all to warn on the so-called second-round effects. You know, as prices rise, they warn of the danger of raising salaries by the same amount and making the situation chronic without correcting it downwards. Because de Guindos remains convinced that, although inflation risks are skewed to the upside now, in the medium term, they are balanced. We’ll see if we don’t have to pay for this late reaction beyond the already significant decline in our purchasing power.

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