Stagflation will engulf the eurozone in the coming months because of rapidly rising commodity prices, weakening confidence, and tighter financial conditions as a result of Russia’s invasion of Ukraine, BCA Research says.
However, the stagflation episode won’t last beyond the summer, the research firm says. “Energy markets will regain their composure, the European Central Bank won’t tighten policy this year, household net worth is strong, the post-pandemic reopening continues, and fiscal policy will become significantly looser,” BCA Research says.