The European Central Bank (ECB) is apparently also concerned with the question of how sustained the rise in inflation rates in Europe will be.

Several members of the Governing Council, the highest monetary policy body of the central bank, have now made public statements.

Christian Siedenbiedel

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The French central bank chief François Villeroy de Galhau said on Thursday at an online conference that he expected the situation to ease in the coming year.

"Inflation should largely fall below two percent again within a year."

On the other hand, board member Isabel Schnabel emphasized that although price developments are indeed expected to ease somewhat in the coming year, inflationary pressures could remain high: "It would be premature to claim that the current price dynamics will subside completely next year."

The Deutsche Bundesbank last stated in its monthly report that inflation rates in Germany are likely to be above 2 percent in the middle of next year as well.

It's about the bond purchases

The background to the statements are apparently also different views in the Governing Council of how to deal with the bond purchase programs in the future.

ECB President Christine Lagarde had said after the September meeting of the Governing Council that it would be considered now and a decision would be made in December.

The central bank had initially only decided to slow down the rate of bond purchases.

This week there was speculation that the central bank could let the crisis program PEPP expire as planned in March and in return increase the long-term bond purchase program APP somewhat in order to prevent a "cliff", an overly abrupt reduction in bond purchases.

The investment bank Goldman Sachs had taken the view that it was unlikely that the central bank would take no further measures at the end of March next year when the crisis program expires and would only buy bonds for 20 billion euros a month after the longer-term purchase program APP.

There will be a transitional arrangement.

Either the ECB is temporarily increasing the APP's monthly bond purchases or introducing a new program for the transitional period - or it is extending the crisis program a bit.

Interesting ECB minutes

Meanwhile, the minutes of the September meeting of the Governing Council published on Thursday showed that the monetary authorities have taken into account the market expectation of an end to these securities purchases in spring when readjusting the Corona emergency program.

That was apparently the subject of discussion in the decision to moderately reduce bond purchases for the fourth quarter compared to the two previous quarters.

Some monetary watchdogs argued that the “friendly financing environment” sought by the ECB had not so far suffered from the expectation that the program would expire.

Therefore, one can trust that the readjustment will not lead to an unreasonable tightening of market interest rates.

"As far as the inflation assessment is concerned, the tone has clearly changed from a very uncritical attitude in the summer to a more balanced view," commented ING economist Carsten Brzeski. The ECB is still tending towards the scenario that this year's inflation surge is only temporary and that the medium-term inflation forecasts are still well below the ECB's 2 percent target. "However, some doubts were expressed in the minutes," Brzeski emphasized.

For example, the records say that both headline and core inflation have surprised when compared to the most recent upward projections of the ECB and that this casts doubt on how well the models on which the projections are based are capable of doing the current economic situation, the structural changes caused by the pandemic and the effects of the new monetary policy strategy of the ECB.