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ECB heads into pivotal policy meeting with inflation and Omicron infections rising


With inflation surging and the Omicron Covid variant expected to spread through the region, the European Central Bank (ECB) has the unenviable task of presenting its policy outlook for 2022 on Thursday, according to CNBC.

The rise in the cost of living for the euro area reached a record high of 4.9% in November, while Omicron looks likely to become the dominant Coronavirus strain with some European economies already locked down due to the Delta variant.

The institution led by Christine Lagarde developed a new bond-buying program in the wake of the Coronavirus in March 2020 to support the euro area. The Pandemic Emergency Purchase Programme (PEPP) is due to end in March 2022 with a potential total envelope of 1.85 trillion euros.

The ECB has also kept its Asset Purchase Program known as APP, amid the pandemic which has a current monthly pace of 20 billion euros. The Central Bank has been using this program in combination with PEPP to sustain the 19-member economy.

A big focus of this week’s meeting will be the new staff projections for inflation and growth. They show whether the inflation target of 2% will be met over the medium term, which is ultimately ECB’s primary mandate. 

“I see an inflation profile which looks like a hump. So it has clearly increased over the last three quarters and we know how painful it is,” Lagarde said at a Reuters conference on Dec. 3, 

“And a hump eventually declines and this is what we project for 2022,” she added.