MNI BRIEF: Infl. Close To 2% Still Most Likely Scenario - Lane

Omicron’s impact on the euro area economy should last only a few weeks, ECB chief economist Philip Lane said in an interview Tuesday, with inflation then set to fall significantly over the course of this year before stabilising at around 2% in coming years. Overall, inflation is more likely to stabilise just below or at around 2% over the medium term than be persistently and significantly above target, Lane said.

If incoming data suggested inflation were to be too high relative to the ECB’s medium-term target “then of course we would respond,” he said, beginning with the end of APP. Wages will respond to rising prices, Lane said, but it is not yet clear to what extent. The direct relevance to the growth and inflation outlook of energy costs means the Governing Council is also following events in Ukraine closely.