MNI BRIEF: Near-Term Upside Risks Offset By Delta Doubts - ECB

Europe's economic recovery from the Covid-19 pandemic remains on-track, with some upside risk to the inflation outlook, the European Central concluded at the July monetary policy meeting, although the emergence of the Delta variant had created fresh uncertainty, with temporary work schemes and government fiscal support both boosting jobs and at the same time as they partially obscure the pandemic's true costs, the accounts of the gathering show.

Most of the governing council shared the view that a fourth wave of the virus would have more limited health and economic impacts thanks to rising vaccination rates and the need for less stringent containment measures, but there were concerns that further mutations affecting this assessment were possible.

Overall, the accounts report, "the picture of a mostly transitory increase in inflation was still widely seen to hold true," with the medium term inflation outlook remaining subdued. Nevertheless, "risks to the inflation outlook were widely regarded as increasingly tilted to the upside [...] over the short term. It was also seen to be the case to a lesser extent in the assessment of the medium-term outlook, although this was more uncertain."