AP: The Challenge of Inflation Forecasting Has Become Steeper, ECB President Warns of Economic Uncertainty
AP, July 6th report, ECB President Lagarde warned that frequent shocks such as the pandemic and the Russia-Ukraine conflict have made inflation forecasting increasingly difficult. The high uncertainty of the future world may lead to increased price fluctuations. She pointed out that the ongoing supply chain disruptions have prompted companies to adjust pricing more frequently, reflecting a structural shift in businesses operating in a permanently high-uncertainty environment. Lagarde emphasized that central bank economic assessments must include extreme scenario analysis, and she used the Russia-Ukraine conflict as an example to illustrate its necessity — at that time, the baseline forecast for 2022 inflation was 5.5% based on rising energy prices, but the worst-case scenario exceeded 7%, and the actual data eventually approached 8%. Faced with the current situation, the ECB has taken action: after the inflation rate fell to 1.9% in May, the bank reduced the benchmark interest rate from its peak of 4% to 2%. At the same time, the threat of US President Trump's tariff increases and the approaching deadline for the EU-US trade negotiations on July 9 are adding new variables to the growth outlook. Lagarde said at the ECB conference in Sintra, Portugal, that scenario analysis can reveal a wide range of abnormal fluctuations in inflation outcomes, "reducing the risk of conveying false certainty to the public." This meeting brought together top global policymakers such as Federal Reserve Chair Powell and Bank of England Governor Bailey to discuss economic challenges.
Original: https://www.toutiao.com/article/1836894999596043/
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