SPEU - Why The Recent Jump In Eurozone Inflation Has Not Changed The Monetary Policy Outlook
- From December 2020 to April 2021, HICP inflation in the eurozone jumped from -0.3% to 1.6%, the fastest acceleration in the history of the series.
- Energy inflation, partly due to COVID-19-related base effects, has accounted for the bulk of the pick-up, along with other special factors, including VAT changes in Germany and Eurostat's annual reweighting of HICP items.
- Upward pressure on core goods inflation is likely in the coming months but given the large output gap and labour market slack, the risk of significant "second round" effects on eurozone wage and unit labour cost growth will remain low.
- The ECB's near-term priority will continue to be the preservation of very accommodative financial conditions, therefore, evident in the recent faster pace of asset purchases.
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Why The Recent Jump In Eurozone Inflation Has Not Changed The Monetary Policy Outlook