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ECB to hold its course amid inflation uncertainty

The impact of Omicron on the economy, the recent sell-off in equity and bond markets, and even the geopolitical tensions over Ukraine are unlikely to worry the ECB’s governing council unduly. Instead, their primary concern will be the uncertainty around the inflation outlook.

Since the Bank has set out a path for policy in 2022, with asset purchases gradually declining (don’t call it tapering!), we suspect that the bar for making any changes this year will be fairly high. But policymakers have been careful not to commit to anything beyond this October, and we think there is a good chance that the Bank will begin raising interest rates sooner than most forecasters anticipate.

Euro-zone Drop-In: Why the ECB will be laying the groundwork for rate hikes in 2023. Join Andrew Kenningham and the Europe team for a discussion about their Q1 euro-zone Economic Outlook report on Tuesday, 1 Feb at 09:00 EST/14:00 GMT. Registration here.

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