Europe's inflation crisis will linger for years to come: Analysis

Euro zone inflation may have peaked but will subside so slowly that it could be years before it gets back to the European Central Bank's 2% target, keeping pressure on the ECB to tighten policy well into 2023.
Having raised interest rates by a record 200 basis points since July, the ECB has already taken a giant step towards taming inflation which hit 10.6% in October before easing last month to 10.0% - still five times the target level.
Pipeline pressures remain abundant, however, with energy prices still sky-high, unemployment at record lows, and wage growth accelerating. Government stimulus measures are working against the ECB's policy tightening, and too much of the energy price rise has seeped into the broader economy through second-round effects, fuelling underlying price growth.
Pipeline pressures remain abundant, however, with energy prices still sky-high, unemployment at record lows, and wage growth accelerating.
Government stimulus measures are working against the ECB's policy tightening, and too much of the energy price rise has seeped into the broader economy through second-round effects, fuelling underlying price growth.
Meanwhile, a recession that was expected to ease inflationary pressures is now seen milder than feared.
All of this suggests inflation will ease back from record highs only slowly in the early months of 2023, with underlying inflation, more closely watched by some ECB policymakers than the headline figure, remaining stubbornly high.
"The core inflation rate is unlikely to peak until mid-2023 and will only fall slowly thereafter," Commerzbank economist Christoph Weil said. "Against this backdrop, the ECB's goal of pushing the inflation rate back to just under 2% on a sustainable basis seems a long way off."
Reuters
002