ECB Insight: Council’s Decision Not to Wait Until April ‘Not Very Difficult’ Given Inflation Data

11 March 2022

By David Barwick – FRANKFURT (Econostream) – Against the backdrop of high inflation, the European Central Bank Governing Council arrived relatively easily at an agreement this week not to wait until April to make monetary policy decisions, Econostream understands.

‘The view was expressed, “Oh, we have uncertainty, let’s not act at all”’, an insider who spoke to Econostream said of the Council’s deliberations. ‘But uncertainty doesn’t mean inaction, it just means acting with caution.’

On the question yesterday of whether to take a decision now or in April, ‘everyone ultimately agreed that we need to act’, he said. ‘Why? Because everyone sees that inflation is also going up in their countries.’

‘What we see in front of us is this big pick-up of inflation. It’s really high, and another very important thing is that there are many signs that it has shifted to the prices of other goods and services', he said. 'What you don’t want is expectations to de-anchor.'

In that context, the decision not to wait was thus not very difficult to reach, he said.

‘When you read the public comments of governors, you can’t help but think, like me, “Wow, the views really diverge.”’, he said, citing by way of example Austrian National Bank Governor Robert Holzmann’s call for early interest rate hikes.

‘It seems that there’s such a huge distance between him and, let’s say, the Greek governor’, he said. ‘But there’s not. When we’re all there together, everyone gravitates towards the centre. And even when there is a difference, it’s minor.’

In any case, he said, ‘in April I expect we’ll have not less uncertainty, but even more than now’.