Omicron should not move European Central Bank interest rates

Due to high inflation and the new variant of the coronavirus omicron, the European Central Bank (ECB) should not enter into too long a long-term monetary policy commitment. The next meeting in mid-December, on the other hand, should provide both the market and the citizens with a more concrete picture of its plans. ECB chief Christine Lagarde said on Friday. Otherwise, she said, it would only increase uncertainty in the next phase of the pandemic marked by the new variant. Lagarde also expressed the belief that the emergency bond purchase program, which the ECB gradually increased to 1.85 billion euros, could be completed as planned in March next year. Regular bond purchases are pushing down long-term interest rates on corporate, consumer and government loans and are among the ECB's most important support instruments. The ECB chief reiterated, in line with earlier statements, that an increase in interest rates next year is unlikely. However, if the conditions for tightening arise, the central bank is ready to act without hesitation, Lagarde said. The ECB's key interest rate has been at a record low since March 2016. The bank wants to keep it at this, or even lower level, until year-on-year inflation stabilizes at the two percent value it considers optimal for price stability in the monetary union. Although prices in the eurozone have been rising at a much faster pace recently, Lagarde said last month that she did not consider tightening monetary policy appropriate. According to her, inflation should slow down and an increase in interest rates would not have the desired effect and, on the contrary, could slow down the economic recovery. Last month, inflation in the eurozone climbed to a record 4.9 percent. This was mainly due to the sharp rise in energy prices and the disruption of supply chains as a result of the pandemic.