ECB Governing Council member Robert Holzmann said, “an increase to the deposit rate to zero by the end of the year would be important for monetary policy because it increases optionality.”

“If, towards the end of the year, we were to find that inflation will remain higher for longer, we would have to tighten monetary policy more and raise interest rates more significantly,” he added.

ECB Chief Economic Philip Lane said in an interview, “right now, clearly inflation is a huge issue across Europe, absolutely.” But he added, “this essentially is an imported inflation shock, it’s a supply shock… we would still maintain … most of this inflation will fade away”.

“We do think that inflation will decline later this year and will be a lot lower next year and the year after compared to this year,” he added.

“There are mixed signals coming through… some indices are showing upside concern for energy prices and other indices are showing downside concern for activity levels through the sentiment channel.”

“In March we had an inflation outlook which was getting close to 2 per cent. If that outlook is maintained, we will be looking to end net purchases in the third quarter. If it weakens, or if financing conditions deteriorate, that would be inconsistent with delivering that action. Then we would have to think again,” Lane added.

Full interview here.

ECB Executive Board member Isabel Schnabel said yesterday that it had “left the door ajar” for more asset purchases if the impact of Russia invasion of Ukraine turn out to be much worse.

“If we now fall into a deep recession due to the Ukraine crisis, we’ll have to rethink that,” she said. “Otherwise, we’ll end the bond purchases in the third quarter and as soon as we’ve done that we can raise rates at any time depending on how inflation develops.”

Separately, Governing Council member Mario Centeno emphasized “normalization of the ECB’s monetary policy will be carried out gradually and proportionally at the end of this year”.