Surging inflation urges ECB to hike rates

Photo: EPA Christine Lagarde

The rising consumer prices in the Eurozone are putting pressure on the ECB board of governors to rise interest rates. The final decision will be taken at the banks board meeting later this week, AFP reported. The ECB policymakers are expected to signal if they might start easing their massive pandemic era stimulus.

As the economic recovery gained pace in the 19-nation club, consumer prices surged in August at a speed not seen in the past decade, climbing beyond three percent overshooting the ECB's new two-percent target.

ECB president Christine Lagarde previously promised to "look through" the surge and policymakers expect the rate to rise even further in coming months before falling back. "We are more worried about the inflation rate being too low in the medium term rather than too high," Isabel Schnabel, a member of the ECB's executive board, said last month. Jens Weidmann, the president of the German Bundesbank, urged the ECB in August not to ignore the risk of a higher inflation outlook, and said the ECB must stand ready to gradually scale back its bond-buying.

The ECB last year launched a 1.85 trillion euros pandemic emergency bond-buying programme (PEPP) to help the euro region weather the coronavirus crisis.

The ECB will on Thursday also unveil the latest quarterly growth and inflation forecasts, but analysts expect few surprises. The inflation outlook is predicted to stay roughly unchanged, at 1.5 percent in 2022 and 1.4 percent in 2023 keeping the ECB's 2.0 percent goal well out of reach. Lagarde's news conference on Thursday is expected to earmark signs of future changes in strategy as the Eurozone bounces back from the coronavirus shock. Consequently, the ECB could start by "signalling a 'modest' slowdown" in the pace of the PEPP scheme, from 80 billion euros per month to 60-70 billion euros.

Similar articles

  • EU dismisses risks from AstraZeneca jabs

    EU dismisses risks from AstraZeneca jabs

    The medicine regulator of the EU (EMA) announced that it could not confirm fears that women and young adults were at a higher risk of rare blood clots with low platelets after vaccination with AstraZeneca's Covid-19 jab. Limitations in the way the data was collected meant that EMA could not identify any specific risk factor that made the condition, thrombosis with thrombocytopenia syndrome (TTS), more likely, Reuters reported.

    129
  • Mediterranean countries discuss climate change, migration

    Mediterranean countries discuss climate change, migration

    Nine European Mediterranean countries held a summit in Athens on Friday afternoon to discuss issues ranging from climate change to migration and Afghanistan, news wires reported. The one-day gathering, dubbed the EUMED 9, brings together the leaders of Spain, France, Italy, Malta, Greece, Cyprus, Slovenia and Croatia. Commission head Ursula von der Leyen will also attend the meeting.

    127
  • Optimism about the future of the EU on the rise

    Optimism about the future of the EU on the rise

    It reached its highest level since 2009, trust at its highest since 2008

    Attitudes towards the EU remain positive and broadly stable, according to the latest Standard Eurobarometer conducted in June-July, the EU press service reported. While optimism about the future of the EU reached its highest level since 2009, trust in the EU remains at its highest since 2008, and support for the euro remains stable at its highest since 2004.

    86