ECB Governing Council member Klaas Knot said, “At this point, the dominant worry is inflation. That is why normalization of policy, the withdrawal of stimulus is the appropriate policy response.”

He expected the asset purchases to end by the end of the year. “That means September should be available (for a rate hike),” Knot said. “Not that I expect rates will have to go up in September.”

“A rate hike in the fourth quarter to me still is a realistic expectation… but by no means a certainty, he added.

ECB President Christine Lagarde said in a speech the central has given itself some “extra space” in monetary policy by stating that rate hike will come only “some time” after ending net asset purchases.

“This maintains our traditional sequencing logic, but also gives us extra space if needed after we stop purchasing bonds and before we take the next step towards normalization,” she said. “This will allow us to test whether the convergence of inflation to our target that we project today is robust to current and potential new shocks,”

Lagarde also said the outbreak of war has ” introduced new uncertainty into the outlook”, with ” the short-term factors pushing up inflation are likely to be amplified.” Inflation out hit 5.1% on average hits year, and even exceed 7% in the “severe scenario”.

Full speech here.

ECB Governing Council member Joachim Nagel told German newspaper Handelsblatt, “I don’t expect stagflation at the moment, even though the fallout of the war will boost inflation rates and weaken economic growth.” He added that there are currently “no signs” of a wage-price spiral.

He said ECB’s current approach of tapering asset purchases while being non-committal on rate hike was a “good and balanced” approach. He said, “”I consider it very important that we don’t pre-commit in times of high uncertainty, but stay flexible.”

ECB President Christine Lagarde said in a speech that the Russia-Ukraine war would “lower growth and raise inflation through higher energy and commodity prices, the disruption of international trade and weaker confidence”. But the baseline scenario is still for the economy to “grow robustly in 2022”.

However, “uncertainty surrounding the outlook had increased significantly”, policy makers are looking at two alternative scenarios that ” growth could be dampened significantly and inflation could be considerably higher in the near term”. Still, “in all scenarios, inflation is still expected to decrease progressively and settle at levels around our two per cent inflation target in 2024.”

Lagarde added that if data support the expectation that medium-term inflation outlook will not weaken even after the end of net asset purchases, ECB will “conclude net purchases in the third quarter”. Any adjustments to interest rates will “take place some time after the end of our net purchases and will be gradual.”

Full speech here.