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Recent price increases are being driven by commodity inflation and supply-chain snags should prove only temporary, European Central Bank Governing Council member Ignazio Visco said on Saturday.
In a speech commemorating economist Marcello De Cecco, Bank of Italy governor Visco said that for now there's little evidence of higher supply-chain prices being passed through to consumers.
Salary increases should remain subdued given the large number people left out of work from the pandemic, he said, a view that supports the ECB's forecast that inflation will slow in 2022 after peaking in the coming months.
“The pressures on producer prices should prove to be temporary and not result in a persistent rise in inflation,” Visco said. The ECB “should act cautiously in countering shocks that appear to be only temporary in nature.”
Euro-area inflation accelerated more than expected to the highest level in 13 years in September. While ECB President Christine Lagarde reiterated this week that she considers the current spikes to be “largely transitory,” other euro-area governors have been voicing increasing concerns.
Visco acknowledged that the long-term impact of the pandemic -- as well as that of the digital and energy transitions -- on price dynamics must be carefully examined by policy makers. But he stressed that, in the short term, the ECB will look at all available options, including bond buying programs, to ensure that the euro area continues its exit from almost a decade of very low inflation.
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