Take the Foot Off the Gas? Not So Fast at the ECB
Many central banks are doing more than talk about talking about tapering. The European Central Bank needs to stand pat for now.
Keeping everyone on the program
Photographer: Alex Kraus/BloombergAs growth rebounds, consumer prices are rising around the world. While most major central banks are probably months away from tightening monetary conditions, especially given the contagious delta variant, many are starting to mull when to stop pushing so much stimulus into the economy. For the European Central Bank, though, any change in direction is more distant than for its peers.
The ECB has flagged that it will change its forward guidance at its meeting this week, after a policy review that gives it room to allow inflation to overshoot its newly cemented target of 2%. A likely change in emphasis to actual inflation outcomes, rather than forecasts, means the current relaxed stance will need to last for even longer. That could set the scene for a renewed outbreak of infighting between the central bank’s hawks and the doves.