Euro zone inflation hump near its peak, will decline next year: Lagarde

FILE PHOTO: President of the European Central Bank (ECB) Christine Lagarde reacts as she takes part in a news conference on the outcome of the Governing Council meeting, in Frankfurt, Germany, October 28, 2021. REUTERS/Kai Pfaffenbach//File Photo

FRANKFURT (Reuters) – Euro zone inflation is still seen as temporary and may have already peaked, soon beginning a decline that will continue through next year, European Central Bank President Christine Lagarde said on Friday.

“I see an inflation profile that looks like a hump,” Lagarde said in an interview at  the  Reuters Next conference. “And a hump eventually declines.”

“We are firmly of the view, and I’m confident, that inflation will decline in 2022,” she said.

Lagarde’s comments come after inflation in the 19-country currency bloc soared to a record-high 4.9% last month, more than twice the ECB’s 2% target, and indicators suggest that it will only fall below that mark in late 2022, at the earliest.

High inflation will likely complicate the ECB’s crucial Dec. 16 policy meeting, where policymakers will almost certainly end a 1.85 trillion euro emergency stimulus scheme but also will consider ramping up other support measures to fill the void.

While policy doves, who are in the majority, have been advocating ample support even beyond the emergency measures, the risk of inflation holding above the ECB’s target will likely fuel conservatives who want the ECB to step back at least a notch.

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