European Central Bank plans to introduce policies to contest the inflation surge that is highest in the decade

It reached a 3% record high after 10 years in the eurozone inflation division wherein a gain of 2% was witnessed in the second quarter.

Amid towering inflation and rapid economic developments, the market observers are busy watching the European Central Bank while the Frankfurt institution will gather to deliberate its stimulus, during the ongoing pandemic, this week. Some internal and external observers at the bank feel that the ECB should decrease its monetary stimulus range due to the rising issues of the global supply chain, leading to a surge in prices of all goods.

“Whereas the ECB may moderate the pace of its emergency asset purchases modestly in [the fourth quarter], we do not expect the bank to announce when and how it will phase out its big ‘Pandemic Emergency Purchase Programme’ (PEPP) and whether and to what extent it will beef up its modest standard Asset Purchase Programme (APP) and make it more flexible,” Holger Schmieding, a chief economist working for Berenberg Bank, said in a research statement. “These key decisions, which promise to be highly controversial, will likely be postponed to the December meeting,” he added.

The President of the European Central Bank, Christine Lagarde generated the latest asset purchase program, earlier in March 2020, to back the euro region. The PEPP will conclude in March 2022 with a probable figure of 1.85 trillion euros ($2.19 trillion).

It reached a 3% record high after 10 years in the eurozone inflation division wherein a gain of 2% was witnessed in the second quarter. This will push the ECB to flourish as per viewed by Vice President Luis de Guindos.

“On a forward-looking basis it’s unclear how much more positive the ECB can turn amid lingering concerns over the Delta variant, the Chinese slowdown, Fed tapering or supply side bottlenecks,” said Frederik Ducrozet, an ECB observer at Pictet Wealth Management, in a research statement.

It will certainly be a tough call to create a balance between ECB’s ranks on the APP, as the plans will be based on the size and elasticity of the APP by 2022.

Source CNBC
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