ECB will react to second-round inflationary effects – Handelsblatt

FILE PHOTO: European Union flags flutter in front of the European Central Bank (ECB) headquarters in Frankfurt, Germany April 26, 2018. REUTERS/Kai Pfaffenbach

March 20, 2022

FRANKFURT (Reuters) – The European Central Bank will take action if it sees second-round inflation effects and an unanchoring of medium-term inflation expectations, European Central Bank Vice President Luis de Guindos told a German newspaper.

Earlier this month, the ECB accelerated its exit from unconventional stimulus and investors have increased their bets on higher ECB rates.

De Guindos told the Handelsblatt in an interview published on Sunday that second-round effects and the unanchoring of price expectations were “key factors” for the central bank.

“If we see them, we will act,” he said.

When asked about the risks for the European financial system from the war in Ukraine, de Guindos said there were no liquidity bottlenecks, companies issued bonds and stocks were volatile, but without “dramatic developments”.

He pointed to the triggering of margin calls for commodity derivatives, which has led to increased collateral to cover open positions.

“But from our observations, those facing these margin calls have so far been able to meet them,” he said.

(Reporting by Tom Sims; Editing by Hugh Lawson and Emelia Sithole-Matarise)