ECB Vice President Luis de Guindos said that while inflation in the Eurozone would take longer to return to target than previously thought, there is no sign that high prices are becoming embedded in wages.

High inflation poses a challenge to the ECB, which has limited experience dealing with quick price increases, and complicates a key policy decision expected on December 16.

While the ECB has maintained that inflation is just temporary and will return to target on its own, a rising number of policymakers are concerned that a less favourable outcome is also possible, and that the bank should thus reduce stimulus.

While essentially echoing the ECB's recent stance, de Guindos acknowledged that inflation risks were "moderately" on the upside and that the decline would be slower than previously anticipated.

ECB's de Guindos sees 'significant' rebound in H2 of 2021 -

"We are totally convinced that inflation will begin to drop at the beginning of next year, and that inflation will begin to decelerate much more in the second half of next year, bringing it closer to our objective of 2%," de Guindos said.

"Perhaps the convergence towards the 2% target will take a little longer," he added, "but there is no doubt that inflation will decelerate in 2022."

Inflation reached a record high of 4.9% last month, and most private forecasters do not expect it to fall below the ECB's 2% objective until very late in 2022.

De Guindos also downplayed the impact of rapid price increases, claiming that there is no evidence that wages were reacting to temporary price pressures.

While supply chain bottlenecks and pandemic-related restrictions may slow growth in the short term, he believes these factors will have little impact in the long run. "I don't believe this will derail the Eurozone's recovery," he said. "In the medium term, growth factors are quite robust."