Inflationary pressure could force the ECB to act

Frankfurt (Dec 17)  After the lackluster ECB rate statement and press conference on Thursday the ECB governing council members have sprung into life today. Inflation is not a new story, the BoE and Fed have taken action by raising rates or cutting QE already but the main central bank that has been behind the curve has been the ECB.

Today there have been some comments from ECB's Villeroy who said that "we are probably close to inflation peak in the Euro Area". This is hard to determine but the latest Markit PMI reports have confirmed that cost pressure has subsided over the last month. The spanner in the works here could be the omicron COVID-19 variant as it has hit mainland Europe but the producing nations around the world (namely India and China) have not reported the same rapid rises seen in the U.K. for example.

ECB officials have now said that they see a new inflation era with a goal in sight. ECB's Rehn seems to be seeing a clearer picture as he said the inflation forecasts are subject to very high uncertainty. This was confirmed by comments made by ECB's Simkus who said inflation will be higher than expected in 2022. So does this mean the transitory narrative is now over and done with?

Reuters