The signs pointing to a slowdown in growth in the Euro Zone are opening the door for the regional economy to enter a new period. technical recessionAs noted by Inflationary pressures, it will likely take some time to dissipate. German representative on the board of directors European Central Bank (ECB), Isabel Schnabel.
“There is strong indications that growth will slow “I wouldn’t rule out a technical recession, either, especially if Russia’s energy supply is cut further,” the German economist told Reuters.
In this context, Schnabel pointed out that downside risks for economic growth in the Euro Zone have also increased. additional supply-side shocks from drought or low water levels in major rivers.
Although in this way the economy has demonstrated its adaptability, the German energy price ‘shock’ ‘too big to fully stabilize’Despite underlining that there is heterogeneity among Euro countries, it is seen that Germany is the most affected among the largest countries.
Despite the expected deterioration in activity in the euro area, Schnabel assured that it “is not currently seeing any signs of a prolonged and deep recession”. “It is not even clear whether there will be a technical recession in the eurozone. I just wouldn’t rule it out“, added.
As for inflation, Germany’s representative on the ECB board stated that strong inflationary pressures will continue for a while and will not disappear quickly.
“Even as the normalization of monetary policy continues, It will take some time for inflation to return to 2%He added that it cannot be ruled out that inflation will increase further in the short term.
In this sense, although most references to long-term inflation expectations remain around 2%, the Germans warn: A number of indicators point to a high risk of dislocation. “I think it’s very important that we take these signs seriously,” she says.
Moreover, given the difficulty of predicting when inflation will peak, the economist argued that it is important to give more weight to real inflation data in the ECB’s monetary policy decisions.
Thus, before the meeting ECB Governing Council Schnabel suggested his positive position for the institution to act decisively again next September, as the latest data suggests there were concerns that existed in July, when the central bank decided to raise interest rates by 50 basis points. points, “not mitigated”.