Markets Don’t Believe in the ECB’s “Cooling Inflation” Story

Eurozone inflation expectations may continue to run hotter than the 2% target of the ECB next year, a Reuters survey of economists showed. At the same time, experts revised their forecasts for consumer prices upwards for the fifth month in a row.
Although inflation surpassed 4% last month, more than double the ECB's target, the regulator - unlike most other central banks - has brushed aside calls for policy tightening, calling the price rise temporary and arguing that it will start to decline next year.
However, supply chain problems caused by the pandemic and rising oil prices are calling these views into question. Housing price increases are putting additional pressure on the ECB.
According to analysts' estimates, inflation in the eurozone next year will average 2.2% after accelerating to 2.4% this year, against 1.8% and 2.3%, which were forecast in October. These estimates are higher than the ECB's forecasts of 2.2% and 1.7%, respectively.
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