FRANKFURT, Germany (AP) – The head of the European Central Bank says that its monetary stimulus efforts are still very much needed to support the continent’s economic recovery – despite the recent spike in inflation in the countries that use the euro currency.
Mario Draghi told members of the European Parliament on Monday that the uptick in annual inflation to 1.8 percent was mainly due to higher oil prices, not to fundamental price pressures in the economy from rising wages.
The inflation figure for January was a big jump from 1.1 percent in December and on paper complies with the bank’s goal of just under 2 percent. Yet the increase may not last, and when excluding volatile items like food and fuel, inflation is still only 0.9 percent.
Draghi said that the bank’s strategy “prescribes that we should not react to individual data points and short-lived increases in inflation.”
He said “underlying inflation pressures remain very subdued” because workers’ wages and business hiring remained slacker than they could be. He even held out the possibility that the stimulus could be stepped up if the outlook worsens.