Chief Economist of the European Central Bank (ECB) Philip Lane said on Thursday that the central bank is expecting inflation to fall back in 2023.
During an IMF podcast, Lane explained that inflation in Europe is currently heavily driven by the "energy shock," as in October, this component made up 42% of the rise in prices. The ECB official also mentioned that not everything is on the supply side, as "with the economy now recovering from the pandemic, demand has recovered." Nevertheless, the "dominant issue" remains energy.
Lane stressed that so far ECB has "raised interest rates by 200 basis points, two percentage points already" and that it plans to continue down this path as the mandate of delivering the 2% target remains in the center.
