Europe needs action now on inflation to brake loss of euro trust

ECB should raise rates immediately to zero and prepare bigger increases later

The European Central Bank’s asymmetric monetary policy approach, followed for several years, has now become a source of instability – the opposite of what its mandate decrees. At any sign of economic weakening, the ECB tends to lower interest rates aggressively. But when inflationary pressures rise, it sticks to a ‘wait and see’ policy, arguing that rising prices are temporary and inflation will soon return to the 2% norm.

After announcement of the 7.5% inflation rate in March, the highest since the euro began, this policy of vacillation has run its course and must now end. The right time for a strong message to politicians, the public and financial markets is at the 14 April press conference following the conclusion of the ECB’s two-day policy meeting. The ECB should immediately raise its minus 0.5% deposit rate to zero and prepare for bigger increases later. It should definitively end its asset purchases in the summer, strengthening the indications the governing council already gave at the last policy meeting on 10 March.

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