Vulcan Insight

ECB speeds up exit from bond-buying

11 March 2022

The European Central Bank announced this week that it is speeding up its exit from bond purchases as the economic effects of the war in Ukraine lead to a surge in inflation across the EU.

The decision aims to secure “as much optionality as possible” in view of the “huge uncertainty” faced by the eurozone, ECB President Christine Lagarde stated at a press conference following the announcement. At the same time, the central bank couldn’t simply ignore record-high inflation.

“The prospects for the economy will depend on the course of the Russia-Ukraine war and on the impact of economic and financial sanctions and other measures,” bank president Christine Lagarde said. “At the same time, other headwinds to growth are now waning,” she said, pointing to signs that some of the supply bottlenecks that have held back business are showing “signs of easing”.

Inflation in the 19 countries that use the eurozone is currently at 5.8%, the highest since statistics began in 1997. However, the ECB is still behind the US Federal Reserve, which is set to raise interest rates four times this year, starting next week after inflation came in at a 40-year high of 7.9%.