21:06 10 October 2021
Inflation in eurozone not to turn into a long-term trend
Allianz Research and Economic Research Euler Hermes, after updating and extending their detailed analysis of the dynamics of euro area inflation, reiterates the view that the current cyclical price pressure is unlikely to turn into a long-term trend – this year's strong rise in inflation is due to exceptional circumstances and is therefore likely to be temporary.
Analysts say we are dealing with reflation (price increases following a period in which they were below production costs. Their rise to pre-downturn levels) rather than stagflation (inflation in conditions of economic stagnation)
"At Allianz Research and Euler Hermes, we expect inflation dynamics to weaken already in early 2022, as energy price base effects weaken and temporary factors related to the dynamics of reopening (including supply-side constraints and the impact of German tax changes) The economic stagnation and the persistence of a high propensity to accumulate savings surpluses will dampen inflationary pressures in the longer term but be prepared for it to be even worse before it improves," the report reads.
(ISBnews)
