ECB officials are agonizing over whether — and how quickly — they need to react to the events of the last month when they next meet in late April, mindful of their failure to react in time to stop the last inflation shock four years ago.
The dilemma facing ECB President Christine Lagarde and her colleagues is that, while higher interest rates may be needed to curb inflation, they will also add to the economic problems created by higher energy costs.
Over the last week, Lagarde and other senior ECB officials have said that the Bank won’t rush to raise interest rates, but that it will react if it sees evidence that higher energy prices are spreading through the economy. They’ve also warned that this becomes more likely the longer the war drags on.