Euro zone inflation is likely to be sharply higher in 2017 than projected but will still dip towards the end of the year, Bundesbank president Jens Weidmann said on Wednesday, arguing that accommodative monetary policy remains appropriate.
With inflation surging on higher oil prices, and criticism of the European Central Bank (ECB) mounting in Germany ahead of September’s elections, pressure has increased on the ECB to at least start a discussion about when and how it would scale back its extraordinary stimulus measures.
But the ECB has so far pushed back, arguing that growth is fragile, upcoming elections cloud the outlook, and the rise in inflation is temporary, still requiring years to rise sustainably towards its target of just under 2 percent.
“Assuming that oil prices do not rise any further … inflation this year is likely to be well in excess of the figure projected to date; for Germany, an upward revision of around one-half percentage point is expected, and this might also be the case for the euro area as a whole,” he said in Ljubljana.
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