It is likely to remain high in the near term. Inflation increased to 5.1 per cent in January, from 5.0 per cent in December 2021. Targeted and productivity-enhancing fiscal measures and structural reforms, attuned to the conditions in different euro area countries, remain key to complement our monetary policy effectively. The global recovery and the ongoing fiscal and monetary policy support also contribute to this positive outlook. As the labour market is improving further, with more people having jobs and fewer in job retention schemes, households should enjoy higher income and spend more. Looking beyond the near term, growth should rebound strongly over the course of 2022, driven by robust domestic demand. There are signs that these bottlenecks may be starting to ease, but they will still persist for some time. And third, shortages of equipment, materials and labour in some sectors continue to hamper the production of manufactured goods, delay construction and hold back the recovery in parts of the services sector. Second, high energy costs are reducing the purchasing power of households and the earnings of businesses, which constrains consumption and investment. Although infection rates are still very high, the impact of the pandemic on economic life is now proving less damaging. First, containment measures are affecting consumer services, especially travel, tourism, hospitality and entertainment. Economic activity and demand will likely remain muted in the early part of this year for several reasons. Nevertheless, output reached its pre-pandemic level at the end of 2021. Economic activityĮconomic growth weakened to 0.3 per cent in the final quarter of last year. I will now outline in more detail how we see the economy and inflation developing, and will then talk about our assessment of financial and monetary conditions. The Governing Council stands ready to adjust all of its instruments, as appropriate, to ensure that inflation stabilises at its two per cent target over the medium term. In view of the current uncertainty, we need more than ever to maintain flexibility and optionality in the conduct of monetary policy. Accordingly, we will continue reducing the pace of our asset purchases step by step over the coming quarters, and will end net purchases under the pandemic emergency purchase programme (PEPP) at the end of March. The Governing Council therefore confirmed the decisions taken at its monetary policy meeting last December, as detailed in the press release published at 13:45 today. Inflation is likely to remain elevated for longer than previously expected, but to decline in the course of this year.
This is primarily driven by higher energy costs that are pushing up prices across many sectors, as well as higher food prices. Inflation has risen sharply in recent months and it has further surprised to the upside in January. However, the economy is affected less and less by each wave of the pandemic and the factors restraining production and consumption should gradually ease, allowing the economy to pick up again strongly in the course of the year. High energy costs are hurting incomes and are likely to dampen spending. Shortages of materials, equipment and labour continue to hold back output in some industries. But growth is likely to remain subdued in the first quarter, as the current pandemic wave is still weighing on economic activity. The euro area economy is continuing to recover and the labour market is improving further, helped by ample policy support. Good afternoon, the Vice-President and I welcome you to our press conference. Luis de Guindos, Vice-President of the ECBįrankfurt am Main, 3 February 2022 Jump to the transcript of the questions and answers
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