MNI BRIEF: EZ Outlook Uncertain, Support Still Needed - BoS DG

High euro area inflation largely reflects transitory factors and will be partly reabsorbed in the medium term, but upside risks to the ECB's baseline do exist, ranging from new wage agreements to the appearance of new Covid-19 strains, Bank of Spain deputy governor Margarita Delgado said Wednesday, also noting that a hypothetical disorderly Evergrande collapse might have an adverse impact on global financial markets.

Assessing the post-pandemic growth potential is challenging given the number of factors pointing in opposite directions, Delgado said. The ECB need not be concerned about fiscal dominance given the range of tools at its disposal, she added but monetary and fiscal policy do need to continue to work together for as long as the pandemic lasts. The eventual scaling back of monetary support should be done in a gradual and predictable manner and linked clearly to the improvement in the economic situation and/or the inflation outlook, Delgado added.