The ECB in Frankfurt will make major cuts in government bonds and other bond purchases in the coming months in an attempt to keep high inflation in check. From July, the ECB could end its controversial asset purchase program depending on how inflation develops.
Critics have long argued that the ECB should stop buying buyout programs that further fuel inflation by pumping hundreds of billions of euros of cheap money into the economy every year.
Klaas Knot, chairman of De Nederlandsche Bank, a board member of the ECB, said last month that the central bank should stop buying as soon as possible. “Our foot is still on the accelerator now,” Knot said. “It just adds fuel to the fire.”
Inflation is higher than the ECB forecast and well above the official target of 2%. Prices in the eurozone countries rose by 5.8% last February. The central bank predicts that inflation will rise even higher in the short term and then fall again. But the uncertainty is great.
“The war in Ukraine poses a significant risk, especially for energy prices,” said ECB President Lagarde. If wages also rise and tensions rise, rising energy prices could also increase inflation in the long run.
Source: NOS
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