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Holzmann: Don't see inflation going quickly back to 2% without recession

  • Holzmann says try to monitor at least on a quarterly basis what are the drivers of inflation. So far was only able to identify this for the GDP deflator. Have now succeeded firstly for Austria, then for Eurozone and US and will be able to disaggregate the drivers for headline inflation which will allow to understand much better what is happening. This gives a good impression of the different areas such as profits, wages and energy.
  • In addition, concerned about demographics which will remain a major driver.
  • Also have high level of specialised workers that have retired now and this creates a major pressure for the industry because they are not easily replaced. Cannot be replaced by migration because it takes more than a year in order to get the specialisation level. For me the question then comes regarding retirement age.
  • Outside this immediate concern have climate change. Haven't had any immediate effects that have impacted price level but this will come in the future.
  • Demographics and climate change will make it very, very difficult to get back to 2% target unless it comes with a recession larger than we currently envisage. Hope this won't happen but don't see at the moment the mechanisms to avoid this price pressure and the capacity to move quickly to 2%.

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