ECB Liikanen: Must Take Care To Avoid Inflation Spiral

HELSINKI (MNI) – The European Central Bank must be careful to
ensure that no price spiral takes hold in the Eurozone, even as data
show that longer-term inflation expectations are somewhat above the
ECB’s objective of just under 2%, Governing Council member Erkki
Liikanen said Thursday.

“We must take care that no [inflation] spiral occurs and that the
pressures relating to food prices and other commodities don’t affect
other prices,” Liikanen, who heads the Bank of Finland, said in a press
conference at which he presented the bank’s most recent bulletin.

“Monetary policy cannot affect [international commodity] prices,
but the ECB must of course make its decisions taking these factors into
consideration,” he said.

Liikanen cited data showing that inflation expectations in the
Eurozone are “at less than 2.5% at the moment but more than 2%.”

“It’s hard to predict whether we’ll have a food [price] crisis
similar to what we had three years ago,” he said. “It’s clear that if
there’s a shock on the supply side, it will affect prices.”

Liikanen also noted that the crisis in Japan and the sharp rise of
energy prices in recent months had changed the outlook compared with
late last year.

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