Inflation will fall later this year, says ECB chief economist

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The chief economist of the European Central Bank has said inflation is likely to moderate this year as the current high rate is part of an “epidemic cycle of inflation”.

Data from Eurostat shows inflation in the eurozone rose to 5% in December, a new high for 19 countries that use a single currency.

In Ireland, the rate jumped to 5.7% last month, especially for consumers with energy costs in their pockets.

This three-year period – 2020, 2021, 2022 – is basically part of a pandemic cycle, of inflation, if you like. So in that sense, I think, it should not be interpreted in comparison to historical norms

The ECB’s Philip Lane said the rise in energy prices is “a major concern”, adding that he expects inflation to moderate this year, and continue to decrease in 2023 and 2024.

“Inflation is going to come down this year. It is going to be up to where we want it to be in the long term,” he told RTE.

“But this three-year period – 2020, 2021, 2022 – is basically part of a pandemic cycle, of inflation, if you like.

“So in that sense, I think, it should not be interpreted in comparison with historical norms. The pandemic is a unique link.

“At our December meeting a few weeks ago, we looked at the forecast for 2023, 2024 for this year.

“Our analysis is that this year in 2022, inflation will come down.

“And, in fact, we anticipate inflation to be slightly below our target in 23/24.

“So, yes, we hear numbers like 5% in December 2021. It sounds very strange after a long period of low inflation.

“But again, to reiterate, we think inflationary pressures will ease over the course of this year and in fact, we think inflation will be a little bit below where we want to put it in terms 23, 24. One of our goals.”

Rising cost of energy has been at the root of rising inflation.

An analysis by the price comparison website Bonkers.ie showed that the price increase could increase the annual household energy bill by up to 1,300 euros.

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