Euro zone inflation will pick up as the economic recovery continues, despite a puzzling disconnect between strong growth and weak wages, European Central Bank Vice President Vitor Constancio said.
“We remain confident that the continued closing of the output gap will lead inflation to return to our medium-term objective, yet this return remains conditional on a very substantial degree of monetary accommodation,” Constancio said in Washington.
“The apparent disconnect between strong economic activity, on the one hand, and low inflation and wages on the other is one of the stand-out characteristics of the ongoing recovery,” he added.
ECB policymakers are due to decide on Oct. 26 whether to extend stimulus, with investors now expecting an extension of asset purchases but at significantly lower volumes.
Source: Reuters (Reporting by Balazs Koranyi, editing by Louise Heavens)