ECB needs to look past inflation bounce: Lane By Reuters

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© Reuters. FILE PHOTO: European Central Bank Chief Economist Philip Lane speaks during a Reuters Newsmaker event in New York

FRANKFURT (Reuters) – The surge in euro zone inflation is driven by a slew of transient factors and underlying trends remain weak so the European Central Bank must maintain its ultra-easy policy, ECB chief economist Philip Lane said on Thursday.

“The volatility of inflation during 2020-2021 can be largely attributed to the nature of the pandemic shock,” Lane said in blog post. “The medium-term outlook for inflation remains subdued, amid weak demand and substantial slack in labour and product markets.”

Lane argued for looking through this volatility that could even put inflation above the ECB’s target temporarily and also called on governments to keep spending to prop up growth as the bloc likely sank back into recession in the first quarter and will also struggle in the second quarter.

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