ECB Governing Council member Pablo Hernandez de Cos said “risks to inflation are tilted to the upside in the short term.” Recent data on Recent data on inflation has shown surprising upwards trends both in headline inflation and core inflation. He added, that the level of uncertainty around inflation is very high also due to geopolitical risks.

De Cos emphasized that more than ever it is necessary to keep all options open on monetary policy. But for now, ECB policymakers are sticking to the sequencing, starting first with tapering, before raising interest rate.

He added, that the next move on monetary policy is clear but will be gradual and depend on data.

Minutes of ECB’s April 9-10 meeting showed that policy makers were getting less confident on Eurozone recovery. The minutes noted “it was acknowledged that some recent data had turned out even weaker than expected”. And, “there was now somewhat less confidence in the baseline scenario and that the range of other possible outcomes had widened.”

Also, “the global outlook remained subject to the continued risk of an escalation of trade conflicts and the uncertainty surrounding the withdrawal of the United Kingdom from the EU.”

Regarding the new TLTROs, “some arguments were put forward in favor of pricing the new operations so they would primarily serve as a backstop, providing insurance in times of elevated uncertainty.” Also, “other arguments supported the view that the TLTRO-III operations should be seen as a potential tool for adjusting the monetary policy stance.”

Full monetary policy accounts here.

ECB President Christine Lagarde, speaking at a Financial Times event, warned that the recent phase of quick disinflation might be nearing its end, with the potential for near-term inflation re-acceleration. This caution comes amid the possibility that the dampening effect of high energy prices on year-on-year comparisons may soon diminish.

Lagarde emphasized the need for vigilant monitoring of energy prices, suggesting that the current headline inflation figure of 2.9% shouldn’t be taken for granted. “We should not assume that this respectable 2.9 headline number is something that should be taken for granted and for long,” she stated.

Lagarde also alerted to the likelihood of seeing “a resurgence of probably higher numbers going forwards.” She highlighted that even if energy prices stabilize, the dissipating base effect could lead to higher inflation figures in the early months of the coming year.

Despite these challenges, Lagarde reiterated her confidence in ECB’s current interest rate policy. She believes that maintaining the current rate for a sufficient duration “will make a significant contribution to bringing inflation back to our 2% target.”

However, she was quick to add a caveat, indicating that ECB’s stance might need reevaluation in the face of major unforeseen shocks: “If major shocks come up, depending on the nature of the shocks, we’ll have to revisit that.”