Wartime Economy Freezes ECB’s Retreat from Quantitative Easing
Accelerating inflation combined with slowing growth should keep euro zone policy on hold for now.
The European Central Bank meeting this week is the first gathering of a major monetary institution since Russia invaded Ukraine. War has changed the economic landscape. Rather than lay out a timetable for exiting its stimulus programs, the ECB will need to keep all of its policy options available.
There’s no sign of the accompanying market volatility calming down. The euro is in freefall. Benchmark 10-year German bund yields have dropped back below zero. Stock markets are tumbling. And the money markets have already effectively priced out any chance for an increase in the euro zone’s official interest rate from its current -0.5% level this year.