The war in Ukraine has intensified the upside risks to the inflation trajectory, especially in the short term, despite the European Central Bank’s main scenario continuing to be of gradual convergence towards the 2% inflation target over the medium term, said the policymaker. ECB monetary policy Pablo Hernández de Cos this Monday.
He also said the negative effect of the conflict and the associated uncertainty surrounding the eurozone’s economic growth could reduce inflationary pressures in the medium term.
The ECB has been removing its stimulus at the slowest pace possible this year, but a spike in inflation is now pressing policymakers to end their nearly decade-long experiment with unconventional stimulus to the economy.
European Central Bank officials want to end their bond-buying scheme as soon as possible and raise interest rates as early as July and certainly no later than September, nine sources familiar with the ECB’s thinking told Reuters.
Moderate wage growth in the euro zone is among the factors the institution should take into account when advocating a stance towards a gradual tightening of monetary policy in the region, said de Cos on Monday.
“The arguments to justify gradualism are based on a situation where we see moderate wage growth and we also see inflation remaining anchored,” De Cos said at a financial event hosted remotely by Goldman Sachs.