Belgium (Brussels Morning Newspaper) The European Central Bank (ECB) announced today that it would keep its policy unchanged, maintaining plentiful support for the economy while slowly curbing the stimulus over the coming months, even as inflation continues to hit record figures.
ECB president Christine Lagarde told reporters after the Bank’s announcement that its policymakers will not rush into new moves while acknowledging that surging inflation rates have surpassed expectations.
“Inflation is likely to remain elevated for longer than previously expected, but to decline in the course of this year”, Lagarde declared. “Compared with our expectations in December, risks to the inflation outlook are tilted to the upside, particularly in the near term. The situation has indeed changed”, she stressed.
The ECB had expected inflationary pressures to subside, predicting that the causes of rising inflation would fade in 2022. Its long-term stance was that inflation would abate and actually fall below the ECB’s 2% target by the end of the current year.
Today, Lagarde said that January’s inflation rate of 5.1%, higher than expected, was caused by the direct and indirect impact of energy price hikes, additionally exacerbated by the rising food prices.
Lagarde also indirectly referred to the growing tensions between Russia and western nations over Moscow’s possible invasion of Ukraine, remarking that “geopolitical clouds were hanging over Europe” and that they could also contribute to curbing growth prospects in the eurozone
In its announcement today, the ECB Governing Council stressed that it “stands ready to adjust all of its instruments” with the goal of stabilising the inflation at its 2% target over the medium term.
“Flexibility will remain an element of monetary policy whenever threats to monetary policy transmission jeopardise the attainment of price stability”, the Council stated.