ECB’s Cipollone rules out stagflation, reassures on inflation outlook

Piero Cipollone, a member of the European Central Bank’s Executive Board, pushed back firmly against stagflation fears on April 30, arguing that the euro area’s current economic picture looks nothing like the grim 1970s playbook some commentators have been reaching for. The numbers behind the reassurance Headline inflation in the euro area climbed to 3.0% in April, up from 2.6% in March. Cipollone attributed much of the spike to energy prices, which surged 10.9% year-on-year. Ongoing conflicts in the Middle East have kept oil and gas markets on edge, and those supply-side pressures are flowing directly into consumer price readings. The ECB’s own projections suggest the spike is temporary. Inflation is forecast to moderate to around 2.8% by June, which would represent a partial retreat toward the central bank’s 2% medium-term target. Cipollone described the inflation risks as “very balanced,” a phrase central bankers use when they want to signal that they see upside and downside pressures as roughly equal. Why this isn’t the 1970s In the 1970s, inflation expectations became unmoored. Workers demanded higher wages to keep up with prices, businesses raised prices to cover higher labor...