FRANKFURT, March 10 — The European Central Bank today sped up its plans to wind down its bond-buying programme but gave itself time before raising interest rates, as the conflict in Ukraine clouded the outlook for the eurozone.
The soaring figures, well above the ECB’s two-per cent target, have caused concern amongst members of the 25-member governing council, with calls to end the bank’s highly accommodative monetary policy. The bank stressed, however, that the end-date was dependent on inflation forecasts staying around the ECB’s target, pledging to change the scale or timetable for the stimulus exit if the outlook deteriorates.
The risk of “stagflation” in which inflation soars but growth lists, eroding economic well-being, had “clearly increased” after the invasion, Brzeski said, and left the ECB with a “dilemma”. When the forecasts were last updated in December, the bank expected inflation to hit 4.9 per cent in 2022, before falling to 2.9 per cent in 2023 and 1.6 per cent in 2024.