Surging inflation, economic rebound test ECB’s mettle

Surging inflation, economic rebound test ECB’s mettle

FRANKFURT: Surging inflation and an economic rebound as virus curbs ease will be in focus when European Central Bank policymakers meet Thursday, testing their commitment to keeping pandemic-era stimulus measures in place. The ECB's 25-member governing council is widely expected to hold interest rates at historic lows and leave its massive bond-purchasing schemes unchanged at the upcoming meeting.

But with a brighter outlook on the eurozone horizon as more people are vaccinated and businesses reopen, observers will be eager for clues on when the ECB might start winding down, or "tapering“, its crisis bond buys. The ECB's 1.85 trillion euro ($2.2 trillion) pandemic emergency bond-purchasing programme (PEPP), its main weapon in the fight against the virus fallout, is set to run until March 2022. ECB president Christine Lagarde's Thursday press conference will likely be a tightrope walk between striking an upbeat tone about the region's recovery while stressing the need for ongoing support, observers said.

Lagarde will try to avoid "the T-word“, according to ING bank economist Carsten Brzeski. "Even if economic developments would in our view clearly justify at least having a first tapering discussion, the sheer mention of such a discussion could push up bond yields further and consequently undermine