High inflation puts pressure on Europe's monetary authorities

Created: 04/14/2022, 10:55 am

The ECB headquarters in Frankfurt: Europe's currency watchdogs are discussing future monetary policy today.

© Arne Dedert/dpa

Inflation in Europe is at a record high.

However, it is unclear whether the European Central Bank will counteract this movement at today's meeting.

Frankfurt/Main – The Ukraine war* drives inflation in the euro area to a record high and at the same time weighs on the economy.

The work for Europe's currency watchdog is likely to become even more complicated as a result.

According to economists, the European Central Bank (ECB) is unlikely to initiate a turnaround in interest rates at the Council meeting on Thursday.

The central bank will announce the results of the council meeting in the afternoon (1.45 p.m.).

At its most recent monetary policy meeting in March, the Governing Council of the ECB decided to scale back the central bank's multi-billion dollar bond purchases faster than previously planned.

However, the monetary watchdogs left it open when interest rates in the euro area will rise again afterwards.

ECB: Inflation in Europe at highest level since 1999

Rising energy prices have been driving inflation for months.

The war in Ukraine fuels this development.

In March*, inflation in the euro area reached 7.5 percent, the highest level since the euro was introduced as a settlement currency in 1999. “The inflation data speak a clear language.

Monetary policy must not miss the opportunity to take countermeasures in good time,” warned Bundesbank President Joachim Nagel, who also sits on the Governing Council.

The central bank, whose primary goal is stable prices with a medium-term inflation rate of two percent in the euro area, recently announced that it would stop buying additional government and corporate bonds in the third quarter of 2022.

"If the net purchases end in the third quarter as currently planned, this opens up the possibility of raising key interest rates this year if necessary," said Nagel recently.

ECB: Key interest rate at record low of zero percent for years

The key interest rate in the currency area of ​​the 19 countries has been at a record low of zero percent for six years now.

For years, the central bank has also been investing billions in buying government bonds and corporate securities, which is supporting the economy.