Inflation in the eurozone is anticipated to double to six per cent this year, piling more pressure on the European Central Bank to hike interest rates.
Inflation expectations have shot up from an average of three per cent to six per cent in 2022, according to the ECB’s quarterly survey of economists. This is three times the Frankfurt-based bank’s target rate.
War in Ukraine has exacerbated inflationary pressures in the short-term, ECB president Christine Lagarde acknowledged.
The central bank is planning to stop mass bond-buying under its quantitative easing programme in the third quarter, but Lagarde is yet to pledge a specific date for this.
Within the new survey, next year’s projected inflation was revised from 1.8 per cent to 2.4 per cent. However, a forecast for 2024 was maintained at 1.8 per cent.
Longer-term inflation expectations were boosted from 2 per cent to 2.1 per cent.
Speaking earlier this month, Lagarde said the conflict in Ukraine and “the associated uncertainty,” were “weighing heavily on the confidence of businesses and consumers.”
She added: “Trade disruptions are leading to new shortages of materials and inputs. Surging energy and commodity prices are reducing demand and holding back production.
“Inflation has increased significantly and will remain high over the coming months, mainly because of the sharp rise in energy costs. Inflation pressures have intensified across many sectors.”