MNI:Fast Return To 2% Inflation Difficult-Greek Cenbank Deputy

The cost in terms of jobs and financial instability of promptly returning inflation to a 2% target might be too great given ageing populations and retreating globalization, the deputy governor of the Central Bank of Greece told MNI.

“Another outcome of the IMF spring meetings is that, as inflation is gradually de-escalating, the cost in output and in financial instability that has to be paid to bring inflation quickly down back to 2% might be greater than the benefit as the structural reasons such as demographics, climate change, geopolitics and a less efficient re-globalisation are here to stay with us for a long period of time,”

Theodore Pelagidis said on the sidelines of the International Monetary Fund’s meeting in Washington at the weekend.

Annual inflation across the eurozone fell from 8.5% in February to 6.9% in March, preliminary data showed at the end of last month. The ECB hiked the deposit rate by 50 basis points to 3% at its last meeting in March, and overnight index swaps currently imply a peak of about 3.7% by September or October. (See MNI INTERVIEW: ECB Peak Rate 3.5-4% Good Starting Point-Wunsch)