After being shocked by the Federal Reserve’s (Fed) statement to tighten its policy due to inflationary pressures, analysts now expect the European Central Bank (ECB) to take similar action.
Earlier, Chairman Jerome Powell hinted that the central bank would discuss a faster reduction in asset purchases following mounting inflationary pressures.
The statement has allayed market concerns after seeing US inflation soar to a 30 -year high in October.
This situation is faced not only by the world’s largest economy, but also around the world, including Europe.
The head of the UK Economy and the European Zone in Nomura, George Buckley said that it was still unclear whether higher inflation in the European Zone would leave a lasting impact on the economy.
This follows data published on Tuesday showing inflation reaching a record high in the 25 years the data was collected, with a 4.9% increase in November.
However with the latest threat of a new Omicron variant and the rise of coronaviruses in Europe, the ECB is unlikely to change its monetary policy approach.
In fact, the emergency bond purchase program (PEPP) may not be terminated in March 2022 as originally planned due to this latest threat.
However, will the ECB allow inflation to continue to rise? For now, central bank policymakers are optimistic that the current price increase is only temporary.
Investors are now awaiting President Christine Lagarde’s speech on Friday to get her views on current inflationary pressures and the latest Covid-19 threat.
