ECB sits tight as inflation pressure rises

ECB sits tight as inflation pressure rises

BRUSSELS: The European Central Bank stuck to its ultra-loose monetary policy yesterday, despite record inflation in the eurozone putting the Frankfurt-based institution under mounting pressure. The inflation rate unexpectedly rose to 5.1 percent in the euro area in January, official data showed Wednesday. The figure is an all-time high since records for the currency club began in 1997, 0.1 points higher than the figure for December and well above the ECB’s two-percent target. The steep rise in prices seen globally has induced other central banks to act, with the Bank of England announcing it would raise its main rate by a quarter point to 0.5 percent at a meeting yesterday. The US Federal Reserve is widely expected to follow suit soon after signaling multiple rate hikes this year.

But ECB policymakers left its rates at record lows, including a negative deposit rate that charges financial institutions to park their cash with the central bank overnight. While the decision to stand pat was expected, the pressure on the ECB to tighten policy would grow “in the course of the year”, said Fritzi Koehler-Geib, chief economist at the German public lender KfW. Observers will be scouring ECB chief Christine Lagarde’s planned remarks later