ECB’s Vasle: Inflation Becoming More Widespread and Persisting at High Levels

11 March 2022

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Boštjan Vasle on Friday said that inflation was becoming more widespread.

In a statement issued in his name by the Bank of Slovenia, which he heads, Vasle said that Russia’s assault on Ukraine would not stop ‘favourable’ economic growth in the euro area, but would ‘strongly’ influence inflation, which is ‘becoming more widespread and persisting at high levels.’

In addition to keeping all options open and gradually reducing asset purchase programme (APP) purchases, ending these in 3Q ‘if conditions allow’, a key part of the Governing Council’s decisions yesterday was ‘to gradually adjust key interest rates some time after the completion of the purchase of securities’, he said.

‘With this extension of the scope for action, we have ensured that the completion of net purchases will be followed by an adjustment of interest rates over time, but not necessarily in the short term, as envisaged so far’, he said. ‘At the same time, the members of the Governing Council remain ready to adjust all our instruments to ensure that inflation stabilizes at 2% in the medium term.’

High-frequency data indicated that economic activity had already reaccelerated last month despite the pandemic, he said.

‘Due to the aggravated geopolitical situation, volatility in the financial markets increased, and liquidity also deteriorated’, he said. ‘Funding conditions have tightened, slightly more for the private sector compared to the public sector. Interest rates on borrowing for the private sector have risen significantly, but new levels are still not far from the average levels prevailing in 2018 and 2019.’