European Central Bank (ECB) Vice-President Luis de Guindos said on Thursday that euro zone governments must withdraw support measures they took in response to last year’s energy crisis if they do not want to fuel yet plus inflation.
“As the energy crisis subsides, governments must roll back support measures immediately and in a coordinated manner to prevent medium-term inflationary pressures from building up, which would require a stronger monetary policy response,” said Guindos, in a speech for the presentation of the ECB’s annual report, highlighting that the behavior of fiscal policy is an “important factor” for the inflation perspective.
Guindos also assessed that wages and profit margins are upside risks for euro zone inflation, which in April stood at 7%, still well above the ECB’s official 2% target, but pointed out that financial market tensions linked the turmoil in the banking sector tend to put downward pressure on prices.
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