ECB's Holzman Warns of Potential Long Period of >2% Inflation

Headlines from the ECBs Holzman are crossing the wires. The GC policymaker has stated that there could be a long period in which inflation could run above 2%, but that inflation should be below 2% in 2023 or 2024.

• Furthermore, Holzman argued that while rates hikes would be needed if inflation was driven by a demand shock, at the moment the inflation surge has been underpinned by a supply shock.
• The thrust of Holzman's argument here is perhaps a little unclear, but does suggest that confidence in the ECB's baseline assumption that the current inflation shock is largely transitory, has come under increased pressure as euro area inflation continues to rise. Today's bumper US CPI print will have only intensified the debate within the GC on the nature of the inflationary surge.