The euro area economy “recorded a recovery in the second quarter of the year and, with the easing of restrictions, is proceeding towards strong growth in the third quarter”. It can be read in the Economic Bulletin of the European Central Bank. The Governing Council of the Frankfurt Institute is optimistic about the second half of the year and sees margins of a “return to pre-crisis levels” in the first quarter of 2022. “But there is still a long way to go before the economic damage caused by the pandemic are compensated for, ”warns Frankfurt.
Above all, the proliferation of variants of Covid, starting with the Delta, cast shadows on the recovery. “Although the reopening of large sectors of the economy is supporting a strong recovery in services – we read – the Delta variant of the coronavirus could dampen the recovery of the latter, especially in the tourism and hospitality sector”.
No rate hike until inflation sustained recovery
There is also no news on the interest rate front. The ECB, in the face of the new symmetrical inflation target of 2%, will not raise rates “until inflation reaches 2% well in advance of the end of the projection horizon and in a lasting manner for the rest of this horizon, and until it considers that the progress achieved by underlying inflation will be sufficiently advanced to be consistent with the 2% in the medium term ”. This prospect, the bulletin confirms, “could also involve a transitional period in which inflation is moderately above the target”.
ECB: temporary rise in inflation
In particular, inflation “has risen, although this rise is expected to be mostly of a temporary nature. The prospects for inflation in the medium term remain contained ». The Governing Council believes that “the risks to the economic outlook are substantially balanced”.