The European Central Bank has expressed concerns over the potential for “self-reinforcing” inflation, with governments’ fiscal packages and the weakness of the euro pushing up prices.
The comments came in the minutes from the ECB’s September monetary policy meeting when interest rates were increased by 75 basis points, a move that was supported by “a very large number of members”.
The minutes noted that inflation had repeatedly been higher than expected and that medium term inflation forecasts had risen.
The ECB members also flagged that “the nature of the inflation process was changing.” Inflation had started to become “self-reinforcing”, to the point that even a projected weakening of growth was not sufficient to bring inflation back to target.
The minutes said a number of indicators pointed to an increased risk of inflation staying high over the long term.