Snabel (ECB): Recovery will slow due to Omicron – Inflation will escalate in 2022

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Delay, but not economic derailment recovery in the Eurozone, due to the recent wave of coronavirus cases and the variant Ομικρον, predicts the European Central Banksaid Isabel Snabel, member of the Executive Board of the ECB, in an interview with Le Monde.

“Now, we anticipate a weaker fourth quarter and that is likely to spread at the beginning of the new year. However, we expect a stronger recovery in the future, so the activity will be substantially postponed “, noted Snabel, emphasizing that households in the Eurozone have significant savings, something that supports the recovery.

Regarding inflation, which has reached 4.9% in the Eurozone, Snabel reiterated the ECB’s view that it will remain high for some time, but will de-escalate during 2022. “We are less confident about how fast and “the reduction will be strong,” he noted.

He said, however, that “some companies are telling us that they expect supply chain bottlenecks to continue into 2023”, adding: “We are aware of the uncertainty about our inflation forecasts. “There is an upside risk.”

Wage increases will be very important for the course of inflation and current data show that they are subdued. However, said Snabel, company surveys have shown that they expect higher wage increases.

He also mentioned the possibility of oil prices moving at high levels in the future as well, due to the green transition, the incentives for shale oil extraction investments have decreased. “If this is true, we may see stronger upward trends in oil prices in the future,” he said.

Schnabel expressed uncertainty about whether structural changes in favor of inflation are underway, in contrast to what has happened in previous years. “Are we going to go back to the anti-inflationary environment we had before the pandemic or are we entering a new phase that can be characterized by inflation rather than anti-inflationary shocks?” he wondered.

He also stressed that the ECB must follow a risk management approach, “so that we can react quickly if we see signs that inflation will remain more permanently above our 2% target.”

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