Eurozone | Near-term upside risks for inflation are on the rise
The upside risks to our above-consensus view on eurozone inflation in 2021 are rising. However, we think that this primarily reflects the odds of a more frontloaded bout of reflation as the economy reopens. Risks of a more sustained pick-up in inflation beyond 2021 still appear low, given the region’s ample spare capacity and a gradual labour market recovery keeping a lid on wage growth.
What you will learn:
- Headline inflation has picked up over the last few months, but that is primarily being driven by energy prices. Underlying inflation has not yet returned to its subdued pre-pandemic levels and remains closer to last year’s lows.
- Pent-up demand, rising commodity prices, and supply bottlenecks could send some goods prices soaring this year.
- It’s also feasible that hospitality firms might aggressively raise prices on reopening, rather than wait for demand to recover later this year. More definite signs of either would lead us to upgrade to our 2021 inflation forecasts.
Tags:
Related Services
Post
Why the next era of inflation may be benign globally
A return to the sustained 'lowflation' of the 2010s is unlikely, in our view. But we also doubt that the economic landscape has changed significantly enough that inflation will 'unanchor' from target at a higher level. Over the longer-term, we expect inflation to average around 2%, though this will include longer periods above target than was the norm post-financial crisis.
Find Out More
Post
How GenAI will change the world economy
Generative AI has the potential to substantially improve the medium-term growth outlook for the economy. It arrives at a perfect moment – labour is going to be less supportive of growth as aging dynamics hit home and productivity is flagging.
Find Out More