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ECB Lane: Let’s think about 2020, 2021, 2022 as part of a pandemic inflation cycle

In an interview with Verslo žinios, ECB Chief Economist Philip Lane said, “in the near term, there are some risks from the Omicron variant. But I think it’s increasingly clear that the impact is only for a few weeks… In that sense, I think there’s less concern about Omicron than we had in December.”

On inflation, Lane suggested to think about 2020, 2021, and 2022 as “part of a pandemic cycle”. “In the first year 2020, inflation was relatively low. In the second half of 2021, inflation turned out to be quite high. And then, as we look into this year, 2022, we think inflation will remain high at the start of this year, but will fall later this year, especially towards the end of the year,” he said.

Lane also said if data suggests that inflation would be too high relative to 2% over the medium term, the response would be “to end net purchasing.” Then, only after ending net purchases “would we look at the criteria for raising the interest rates”.

Full interview here.

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