Europe should avoid an inflationary cycle since a surge in energy costs is anticipated to subside next year and there remains slack in the continent's labor market, according to the head of the IMF's European department.

"We don't at this stage, expect any inflation spiral in Europe," IMF European Department Director Alfred Kammer told a news briefing. Also adding "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."

According to Kammer, a supply-demand mismatch in energy was caused in part by the resumption of economic activity as well as other variables such as weather.

He stated that so far, consumer price rises in the eurozone have not translated into second-round pay increases, owing to labor market slack, with hours worked still 3% below pre-pandemic levels.

IMF battles COVID-19 to continue global funding - CGTN

Kammer also stated that the situation was different in Europe's developing nations, which experienced better growth, higher inflation before the epidemic, and shorter recessions last year.

"What we are seeing there, is that some inflation expectations in these countries have inched up," Kammer said. "Because there is less slack in the labor market and some are already at full employment, there is a higher likelihood that could translate into wage increases and give rise to the price spiral."

Several of these nations have tightened monetary policy, and the IMF had advised that these emerging countries reduce asset purchases, according to Kammer. "They should taper out and we should not see large second-round (inflation) effects after we see the action by central banks."