As the economy improves, inflation overshooting the institution’s target is “essential and proportionate,” according to European Central Bank (ECB) executive board member Isabel Schnabel.
“Seems to be accumulating evidence that inflation expectations are beginning to converge with the ECB’s target of slightly around 2%.”
“Continued monetary and fiscal stimulus will be required to achieve this.”
“After years of overprediction of inflation’s future course, stronger inflation prospects must visibly migrate into the baseline scenario and be reflected in actual underlying inflation dynamics,” says the report.
“For a limited time, such tolerance may result in inflation outcomes that are slightly higher than our target. Setting the circumstances to avoid low inflation will be a necessary and reasonable necessity.”
“Rising long-term inflation expectations show that, for the first time in many years, the end of the pandemic provides some cause for cautious optimism.”
“The euro area economy may be able to break free from the low growth, low inflation scenario that has dominated the macroeconomic landscape for the previous decade.”
Her remarks come as the European Central Bank (ECB) prepares for a special meeting this week to discuss modifying its price-stability strategy.
The EUR/USD is trading down near 1.1850, reversing post-NFP gains to begin a pivotal week that includes the FOMC minutes and an ECB special strategy meeting.
As of this writing, the spot is down 0.08 percent at 1.1854./n
