European Commission expects high gas prices to lead to bigger inflation in EU
The European Commission believes that high prices for gas and oil products could lead to higher inflation and slow down the overall growth outlook in the Eurozone – as follows from the forecast of the European Commissioner for Economics, Paolo Gentiloni, writes Euronews
“Soaring energy prices, supply chain disruptions and base effects have a strong impact on rising consumer prices. Compared to autumn forecasts, inflation forecasts for this year have been significantly revised upwards. Futures contracts indicate that energy prices will remain high for a longer time, and price pressure will extend to several categories of goods and services,” he noted.
To keep prices low and stable, the European Central Bank has set an inflation target of 2 percent. At the same time, the European Commission expects inflation in the Eurozone this year will be 3.5 percent.
Experts are cautious about forecasts, as the spread of coronavirus infection around the world remains high uncertainty about possible disruptions in supply chains. It is noted that fears about rising inflation or tightening monetary policy have an impact on global markets.
“The reality is that the Eurozone remains in a vulnerable position. I think we need two things. We need to work at the national level to carry out reforms and increase labour productivity. We also need stronger European actions, namely the creation of a financial union and greater fiscal integration. The Eurozone should not be engaged forever only in discussions on these topics, especially at a time when inflation will rise, and it is no longer possible to intervene to change monetary policy,” said Guntram Wolff, a German economist and Director of the Bruegel.
According to Paolo Gentiloni, the prospects for the European economy as a whole depend, among other things, on tensions between Ukraine and Russia. The stability of the world and economic growth are closely linked.