IMF: Europe should avoid inflation spiral as energy price surges fade

IMF: Europe should avoid inflation spiral as energy price surges fade

Europe should not see an inflation spiral as a spike in energy prices is expected to fade next year and there is slack in the continent’s labor market, the IMF European department chief said.

“We don’t at this stage, expect any inflation spiral in Europe,” IMF European Department Director Alfred Kammer told a news briefing. “The high inflation which we are seeing right now is really driven by … an increase in energy prices, and we expect that to fade out during 2022.”

Kammer said that a supply-demand mismatch on energy was partly due to the restart of economic activity and other factors such as the weather.

He said consumer price increases in the euro zone seen so far were not translating into second-round wage increases, partly because of slack in the labor market, with hours worked still 3% below pre-pandemic levels.

"Generally, the underlying inflationary momentum in the euro area is just not there," Reuters cited him as saying.

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