The Eurozone's inflation jump is not as temporary as previously thought, and price growth this year may exceed predictions, according to European Central Bank Vice President Luis de Guindos.
Inflation hit 5% last month, the highest level in the 19-country currency bloc's history, but the ECB forecasts it to fall below 2% in both 2023 and 2024, even without policy tightening, as one-off pressure eases.
"Inflation will not be as transitory as it was predicted only a few months ago," de Guindos said. "Over the next 12 months, the assessment of inflation risk is moderately tilted to the upside."
Energy costs are likely to remain high as supply-side bottlenecks continue to put upward pressure on pricing, he noted.
Still, risks are seen as balanced in the long run, according to de Guindos, who added that inflation in 2023 and 2024 is expected to be just below the ECB's 2% target.
Some policymakers, however, are more sceptical, warning that inflation might stay above goal for longer as wage policy adjusts to higher price growth, making the surge more persistent.
Although energy costs have risen in recent weeks, de Guindos said that this has had little impact on inflation. "They don't have much of an impact on the estimates we made three weeks ago," he said.
For the time being, the Omicron variant of COVID-19 is unlikely to have a substantial impact on growth prospects, he said, adding that European economies have adapted to live with the pandemic.