Inflation across Europe has reached a new record high of 5.1%, putting pressure on the European Central Bank (ECB) to raise interest rates and lower rising consumer prices.
The cost of living for the 16 nations that share the Euro currency rose to 5.1% in January, despite expectations for a drop to 4.4%. December’s figure had come in at 5.0%.
The ECB’s Governing Council is meeting this week, with an announcement due on February 3. Markets will watch for whether ECB President Christine Lagarde will come out with changes to previous statements that a rate hike is “very unlikely” in 2022. Or whether there will be a tweak in the ECB’s assessment over the “transient” nature of the current spike in inflation.
The ECB seems to accept the fact that there is still significant uncertainty surrounding the inflation outlook. As it often is with central banks and their communications, it will be about small nuances of language when assessing the road ahead for monetary policy in the European region.
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