MNI BRIEF: Sticky Services Inflation Might Be Structural - ECB
MNI (LONDON) - Services inflation in the euro area “might be driven by several structural factors”, including global labour shortages and shifts in preferences towards leisure, which justify caution in its outlook, according to the accounts of the European Central Bank’s September policy meeting, released on Thursday.
The Governing Council discussed the issue, revealing differences within the eurosystem on the balance of risks. Some members highlighted weaker growth and potential risks of undershooting, while others noted scenarios “in which it might be necessary to suspend the cutting cycle for a while, perhaps due to a structural decline in activity or other factors leading to higher-than-expected core inflation.”
However, members “broadly concurred that a gradual approach to dialling back restrictiveness would be appropriate” if the data aligned with projections, recognising that the inflation issue might not be fully resolved. Regarding services inflation, some members emphasised wage pressures as a key driver of its persistence, requiring close monitoring, while others focused on the emerging downward trend. (see MNI SOURCES: ECB To Keep Meeting-By-Meeting Even After Oct Cut )