European Central Bank expected to hold rates as it weighs next move amid high inflation

The European Central Bank is expected to leave interest rates on hold at record lows on Thursday as it considers its next steps in the face of sharply rising inflation and a solid rebound in economic growth.

The Frankfurt-based ECB’s benchmark refinancing rate has been on hold at zero per cent since March 2016.

However, analysts believe ECB chief Christine Lagarde could signal plans at her press conference later for slowing the pace of bond purchases under its €1.85-trillion ($2.2-trillion) Pandemic Emergency Purchase Programme (PEPP).

Introduced in March 2020 as the pandemic engulfed the 19-member eurozone, the PEPP was aimed at shoring up the currency bloc’s economy as well as heading off the threat of falling inflation. The PEPP scheme is currently set to run until March 2022.

However, inflation in the 19-member eurozone hit a near-decade high of 3 per cent last month, significantly above the ECB‘s new annual inflation target of 2 per cent.

Meanwhile, data last released last month showed the currency bloc’s economy expanding at 2 per cent in the second quarter compared with the previous three months as lockdown restrictions were eased and the region rebounded from the pandemic.

The rapid spread of the Delta variant of the virus is still causing uncertainty across the global economy, however, amid a rise in the number of cases in parts of the world.

Source: GNA