European Central Bank policymakers are reassessing the extent of their commitment to extra stimulus, reflecting rising doubts about how quickly inflation is expected to fall as the Omicron coronavirus variant fuels worries of further price rises.
A trio of recent events has sown doubts in the minds of some rate-setters at the ECB, which has been forecasting for months that inflation would fall back below its target and justify the continuation of vast stimulus policies.
The first was the surge in eurozone inflation to 4.9 per cent in November, well above the ECB’s 2 per cent target and a record since the euro was created two decades ago. This was followed by the emergence of a new coronavirus variant, which threatens to prolong the pandemic and with it the supply chain bottlenecks that have pushed up prices.