Marcus Ashworth, Columnist

Lonesome Doves No More: The ECB Sounds Inflation Alarm

The central bank is going to stop QE and shortly afterwards raise interest rates. This year.

February 4, 2022 at 7:30 AM UTC

Marcus Ashworth is a Bloomberg Opinion columnist covering European markets. Previously, he was chief markets strategist for Haitong Securities in London.

Christine Lagarde, President of the European Central Bank, in Frankfurt on Feb. 3. — Christine Lagarde, President of the European Central Bank, in Frankfurt on Feb. 3.
Photographer: Thomas Lohnes/Getty Images Europe

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There was a notable change of tone at Thursday's press conference from European Central bank President Christine Lagarde, but it’s what she left out that was just as important. There was no repeat of the line that interest rate hikes are “very unlikely” this year. The tide is turning for Europe on having to confront rampant inflation.

As the ECB sees both near-term and longer out inflation risks rising, it is going to have to do something about it. Money markets are already pricing in 30 basis points of rate hikes this year. Bank of America Corp. and Commerzbank AG analysts are expecting two 25 basis point hikes in September and December which would return the ECB deposit rate to zero.