D.he European Central Bank (ECB) does not rule out a temporary rise in inflation. In the short term, a certain dynamic in inflation could develop, said ECB board member Isabel Schnabel of the Austrian newspaper “Der Standard”. Such a development should not be confused with a sustained rise in inflation. “That is why that would not have a significant impact on our monetary policy decisions, which are geared towards a medium-term horizon,” said Schnabel.
In December, the inflation rate in the euro zone was minus 0.3 percent. That was the fifth month in a row with negative inflation rates. However, at the turn of the year, new regulations came into force that are likely to cause a certain price increase, such as the renewed increase in VAT in Germany and the CO2 price for gasoline and heating oil, for example. For Germany, the economist Holger Schmieding expects the inflation rate to jump by one percentage point, which should also have an impact on the European rate.
America is already back above 1 percent
In America, inflation was already up. After just 0.1 percent in May, inflation in the United States has been regularly above 1 percent since the summer, in November, for example, at 1.2 percent.
Schnabel disagreed with the idea of the end of inflation. “Inflation is not dead.” In recent years, the economy has been exposed to shocks, which has dampened inflation. In recent years the economy has been exposed to a series of shocks, which has dampened inflation.
“First came the financial crisis, then the euro crisis. Such shocks are not captured by the models, “said Schnabel. Now the pandemic has pushed inflation down again significantly:” However, we expect that to change and that in 2021, based on the currently negative levels, there will be an increase in the Inflation rate will come. “