Who would be a central banker in these febrile times, trying to navigate a path between soaring prices and a gloomy growth outlook? While policy makers everywhere face similar challenges, the European Central Bank’s task is particularly tricky given its deeply negative interest rates. With the money market pricing in a rapid climb in borrowing costs that would threaten to tip the bloc into recession, a monetary compromise is needed.
Europe is far more exposed to the energy risks stemming from Russia’s invasion of Ukraine. Moreover, the geographical proximity of the war is causing a humanitarian crisis and raises the prospect of real economic hardship in the region.