All the implications of an inflationary scenario for Italy
Here is what the effects will be for Italian public finance if the ECB Council in December recalibrates its hyper-expansive posture due to inflationary dynamics. The analysis of the economist Domenico Lombardi
It is likely that the next IMF report on the world economy, whose battery of macroeconomic forecasts will come at the ministerial meetings scheduled for next weekend in Washington, will try to trace the transitory factors of the acceleration in prices recorded recently in the ' Eurozone and, above all, the United States.
The latest available data shows a rate of increase in prices in the Eurozone equal to 3.4 per cent for last month, well above the warning level set by the ECB at 2 per cent. But it is, in fact, a precise datum. In the latest battery of macroeconomic forecasts released by the Frankfurt Institute, also last month, a stabilization in the growth of the price index at 1.7 for next year and at 1, was expected for the Eurozone. 5 in 2023.
Overall, they say in Frankfurt, and they will say next weekend in Washington, the acceleration in the price level is attributable to the dynamic short-term recovery attributable to the ongoing economic recovery and bottlenecks in global supply chains. The IMF, then, will emphasize that all advanced economies have not recovered the levels of pre-pandemic jargon activity.
Yet, there are at least two elements that must be considered: the first is that in a context, like that of the last decade, of low award risk, it is difficult to estimate the path that describes the opposite dynamics, with the possibility of underestimating its pace. Furthermore, the components responsible for the recent increases – raw materials and energy to get to semiconductors – are particularly exposed to the geopolitical risk which, at the moment, appears destined to intensify rather than to ease.
In light of these considerations, it cannot be ruled out that the ECB will correct its forecasts when the future comes next December. Of course, what matters is not the increase in prices by a percentage point more or less after a decade of low inflation that tended to deflation: the ECB has all the tools to govern the dynamics in line with its new inflation target. which was given, equal to 2 per cent in the medium term.
Rather, it is about understanding whose public debt management has benefited from the pandemic emergency program ( PEPP ). If the inflationary dynamics were not transitory, in addition to a revision of the projections of the rate of increase in December, the Governing Council could anticipate the recalibration of its hyper-expansive posture. The words of chief economist Philip Lane that the ECB monitors the financing conditions of sovereign issuers would, consequently, be tested by the market.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/inflazione-italia/ on Tue, 12 Oct 2021 06:08:59 +0000.