European Central Bank chief economist Philip Lane on Friday acknowledged “very high” inflation in Europe and said financial institutions may need to “rethink” their policy stances.
The European zone recorded an inflation reading of 7.5% in March based on preliminary data released today. Headline inflation has broken a new record recently, reaching 5.9% in February. Moreover, experts estimate that inflation will rise even higher in the future.
Lane said the ECB originally expected that inflation would grow at a moderate pace. If this happens then the ECB sees the need to end net asset purchases in the third quarter. Further youth, however, if the set projections cannot be achieved then the ECB should reconsider.
The ECB announced last month that it would end its quantitative easing program in the third quarter given higher inflationary pressures. However, central bank expectations are seen at a crossroads as Russia’s invasion of Ukraine has brought new economic challenges, particularly rising oil and food prices.
As such, it has become one of the dilemmas faced by the ECB on how to deal with high levels of inflation while tackling the slower economic momentum.
The Euro is currently trading lower with a 0.26% decline to the 1.1035 trading level.
