Council worried about a risk of higher medium-run inflation in the eurozone

The release of the ECB December meeting minutes confirmed that inflation remained at the forefront of the Governing Council’s discussions last month. Notably, the assessment of the balance of risks to the inflation outlook seems to have shifted, with a risk of inflation staying “higher for longer” now more widely acknowledged.

What you will learn:

• The minutes and more recent communication continue to indicate that the Council remains divided, both on the inflation and the policy fronts.
• The doves point to a risk of a premature tightening, a lack of a sustained pick-up in a wage growth, as well inflation projections seeing inflation below the 2% target in 2023-2024.
• We continue to share ECB’s assessment that inflation will fall over 2022.