` – The ECB is optimistic about the economic recovery of the Eurozone and expects a return to pre.crisis levels in the first quarter of 2022. However, the central bank, in its monthly bulletin, fears the negative repercussions associated with the Delta variant, especially in services and as regards the increase in inflation, it reassures the markets: it will be temporary and, in any case, prices will not exceed the 2% target.
In any case, on the rise in rates, the central bank assures that it will not act in this sense until inflation is back consistent with a “2% over the medium term” level.
“The euro area economy – reads the beautiful bulletin – recorded a recovery in the second quarter and, with the easing of restrictions, is proceeding towards strong growth in the third quarter”. However the institute warns: “Although the reopening of large sectors of the economy is supporting a strong recovery in services, the Delta variant of the coronavirus it could dampen the recovery of the latter, especially in the tourism and hospitality sector “.
In addition, another risk for the ECB is that of “supply.side bottlenecks“which risk slowing down” production in the short term “. More generally” economic activity is expected to return to pre.crisis level in the first quarter of next year, but there is still a long way to go before the economic damage caused by the pandemic is repaired “.
In this regard, the central bank notes that “the number of beneficiaries of wage integration measures is decreasing, but remains high. Overall, there are still 3.3 million fewer employees than in the period before the pandemic, especially among younger and less skilled workers “.
This is why it is necessary to continue on the path of an “ambitious and coordinated budget policy” which “should continue to support monetary policy in strengthening confidence and encouraging spending”.
Furthermore for the ECB “the Next Generation EU program is also entrusted a fundamental role, to the extent that it should contribute to a more vigorous and uniform recovery across the euro area. “As regards inflation, the ECB reiterates that prices will increase in the medium term but the increases will be temporary and inflation will remain below the 2% target.
“It will still take some time – reads the report – before the repercussions of the pandemic on inflation disappear. With the recovery of the economy, supported by monetary policy measures, inflation should increase in the medium term,” while remaining below the target set by the ECB.
And more generally, “despite their increase, the measures of longer.term inflation expectations remain some distance from the 2% target”. In any case, faithful to the new symmetrical inflation target of 2%, the ECB reiterates that it will not raise rates “until inflation returns to be consistent” in the medium term “with the” symmetrical “2% target.
In this perspective, explains the ECB, this “could also entail a transitional period in which inflation is moderately above the target”.