ECB reiterates inflation stance and holds firm on rates

Decline is taking longer than anticipated — but Lagarde says favourable financing conditions are essential to aid recovery

'We see inflation rising further in the near term but then declining next year,' said ECB president Christine Lagarde.

The ECB still sees a recent rise in eurozone inflation to above its 2% target as temporary, and expects price pressures to ease next year, ECB president Christine Lagarde has said.

She acknowledged the decline would take longer than the ECB had initially expected, but said favourable financing conditions created by its ultra-easy policy were still essential for the eurozone economy to recover from the Covid-19 pandemic.

"We see inflation rising further in the near term but then declining next year," Ms Lagarde said after the ECB left policy on hold.

She identified the main drivers of inflation as energy prices, snarled supply chains as consumer demand recovers, and base effects, especially from last year's German Vat cut, the impact of which should drop out of data in January.

Eurozone inflation hit 3.4% last month and is seen rising to 3.7% in October in flash estimates due to be released tomorrow.

Reuters