The European Central Bank opens the door to raising interest rates...


Inflation risk

“Inflation is likely to remain high for a longer period than previously expected, but it will decrease during this year,” European Central Bank President Christine Lagarde told a news conference.

“Compared to our December forecasts, risks to inflation expectations tend to the upside, particularly in the near term,” she added, noting that price growth in the 19 countries that use the euro has become broader.

“The situation has already changed,” she said.

Lagarde: Massive US stimulus is one of the reasons why the ECB’s approach is different

While Lagarde said the ECB would not rush into anything, she refused to repeat her previous guidance that a rate hike this year was “highly unlikely”.

Sources close to the discussions said a large minority of policymakers pressed the bank to take action on Thursday, possibly by announcing a faster reduction in bond purchases, before agreeing to a delay until March.

German bonds and the euro rise as bets increase in interest rate hikes in 2022

The sources said policy makers have been clear that an interest rate hike this year should not be ruled out given the risks of inflation and the uncertainty surrounding the outlook.

Inflation in the euro area hit a record high of 5.1 percent in January, well above the European Central Bank’s expectations.

Lagarde admitted that the figure, which was driven by rising energy and food prices, surprised even the central bank.





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