Although the monthly inflation rates in the euro zone are rising and rising, the European Central Bank remains expansionary in its monetary policy.

As the central bank announced on Thursday after the meeting of the Governing Council, the highest monetary policy body, it still sees the need for billions in bond purchases.

It also left the key interest rate unchanged, the main refinancing rate at 0 percent and the deposit rate at minus 0.5 percent.

Further decisions are to be made in December.

Christian Siedenbiedel

Editor in business.

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Regarding its further strategy, the ECB writes: “The Governing Council will continue to carry out the net purchases as part of the PEPP crisis program, which has a total volume of 1850 billion euros, at least until the end of March 2022 and in any case until the corona crisis phase in his estimation is over. ”The Governing Council continues to believe that favorable financing conditions can be maintained even if the volume of net asset purchases under the PEPP is reduced“ moderately ”compared to the second and third quarters of this year.

ECB more cautious than the Fed

Holger Schmieding, chief economist at Hamburg's Berenberg bank, expects the ECB to reduce the PEPP crisis program again in January and let it expire in a few short steps from the beginning of April. At the same time, it should increase the normal purchasing program and make it somewhat more flexible than has been the case so far, both in terms of the amount of monthly purchases and the distribution of the paper to be purchased.

This means that the European central bank is more cautious than the American central bank, the Fed, which is planning to reduce its bond purchases this year.

And the Canadian central bank even announced on Wednesday that it would stop its bond purchases now and consider a key rate hike for the next year.

Japan's central bank, on the other hand, indicated on Thursday that it would remain expansionary - possibly for years to come.

In particular, high energy prices have recently caused inflation to rise significantly in Europe.

In September, the inflation rate in the euro zone was 3.4 percent, the highest level in 13 years.

In Germany the rate is even approaching 5 percent.

End of bond purchases required

In Germany in particular, there had recently been no shortage of demands to end the bond purchases soon. The Federal Association of Volks- und Raiffeisenbanken (BVR) demanded an end to the ECB's PEPP crisis program on Wednesday. “The economy in the euro zone is likely to have overcome the pandemic-induced economic slump at the beginning of next year. It is only logical if the emergency instrument resolved by the ECB then expires at the end of March 2022, ”said BVR board member Andreas Martin.

The complainants before the Federal Constitutional Court against the PEPP crisis program had also taken the increased inflation rates as an opportunity to step up again in Karlsruhe.

You now particularly point out the "flagrant contradiction between the alleged goal of the PEPP - to achieve an inflation rate of 2 percent - and the inflation rate of almost 5 percent that has now occurred in Germany".

Like the French professor Eric Dor, they highlight the high proportions of European government bonds that the ECB now holds.

The ECB and the other central banks now held around 39 percent of German government bonds, criticized Dor.