The impact of the Omicron variant should only last “a few weeks” before allowing the recovery in the euro zone to continue, while inflation should recede, said Tuesday a senior official of the European central bank.
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“In the short term,” the omicron variant “presents some risks (…), but I think it’s increasingly clear that it’s an impact of a few weeks,” said Philip Lane, chief economist at the ECB, in an interview with the Lithuanian weekly Verslo žinios.
There is “less concern about Omicron than we had in December,” he adds. Although cases of contamination have continued to skyrocket since the start of the year, progress in vaccination has enabled EU countries to leave large parts of their economies open.
2022 is expected to be “another strong year of recovery” after the rapid recovery in 2021.
These comments echo those of US Treasury Secretary Janet Yellen, who said in mid-January that the Omicron variant would weigh on US economic growth in the months to come, but without derailing it.
The US Federal Reserve (Fed) is preparing to raise its key rates to fight against soaring prices, and will decide at its meeting on Tuesday and Wednesday the pace and extent of the movement.
No similar announcement is expected when the ECB convenes its Governing Council on Thursday 3 February.
Inflation in the euro zone in 2021 ended at an annual rate of 5% in December, unheard of since the start of the euro 20 years ago. However, “we have a clear vision” on the fact that “the inflation rate will drop later this year”, assures Mr. Lane.
The aggregate should return to around 3.2% in 2022, then below 2% – the objective pursued by the ECB – in 2023 and 2024, according to the institution’s latest forecasts.
“If we saw data coming in that suggested inflation might be too high relative to 2%, we would of course react,” Lane said.
In such a scenario, the institute would first end its net purchases of debt on the market before examining “the criteria for raising interest rates”, currently at an all-time low, explains Mr Lane. .
For now, the recovery cycle is more advanced in the United States than in Europe, which is why “we have every reason not to react as quickly as we can imagine from the Fed said ECB President Christine Lagarde recently.