The European Central Bank’s [ECB’s] governing council is expressing concern that inflation in the Eurozone, which ran recently at 10 percent, will become “self-reinforcing” and last for years as the euro remains weak and governments pump stimulus money into national economies to soften the impact of soaring energy costs, the Financial Times reported.

The stimulus plans pose “an upside risk to inflation,” the council warned, adding that the programs should be “temporary and targeted to the most vulnerable households and firms to limit the risk of fueling inflationary pressures.”

The sagging value of the euro, which recently posted a 20-year low against the dollar, also sharpens the risk of prolonged inflation, the group noted.

Even a weakening economy might not be enough to stanch the rise in prices, the group said in its September policy meeting, according to minutes of the session.

During the session, the committee raised the bank’s key interest rate by three-quarters of a point to 0.75 percent.

The rate is “significantly below neutral,” the point at which inflation slows markedly while the economy keeps humming, the group noted.

With inflation at 10 percent and the bank’s key interest rate at 0.75 percent, the actual return on euro-denominated investments is sharply negative, discouraging savings in Eurozone banks.

The comments lent greater certainty to assumptions that the bank would continue to raise rates aggressively in the months ahead, even if the region’s economy slid into recession, the FT said.

Inflation across Europe worsened as Russia progressively cut back natural gas deliveries to the continent through its Nord Stream 1 pipeline. Russia shut down the pipeline indefinitely in August and the conduit was severely damaged by an explosion in September that Western nations judged to be sabotage.

“The longer high inflation persists, the higher the risk that inflation expectations could become unanchored and the costlier it would be to bring them back to target,” the minutes noted.

The ECB’s target inflation rate is 2 percent.

The central bank will push up its key rate to 2.5 percent before 2023 and to a peak of 3 percent early next year, Andrew Kenningham, chief European economist at Capital Economics, predicted in an FT interview.

TREND FORECAST: Like the U.S. Federal Reserve, the ECB waited a year too long to raise rates. Christine Lagarde, the former head of the International Monetary Fund (aka International Mafia Association) and now the leader of the European Central Bank bullshitted for two years that inflation was not rising and the ECB could keep interest rates in negative territory and keep buying up corporate and government bonds.

An outright scam, as with the United States and other nations, so these Banksters could give a reason to keep pumping cheap money into equities to artificially prop up economies decimated by politicians that lockdown economies to fight the COVID War.

Last November, while we had long forecast surging inflation, Lagarde said she didn’t see it coming and it would be “wrong” to raise interest rates now because inflation will begin to cool by the time the new rates would have a chance to impact the economy.

On 3 December 2021, she told the Financial Times that inflation was peaking and that the inflation profile looked “like a hump…and a hump eventually declines.” She said at the time that the ECB is “very unlikely” to alter its interest rate—which has remained negative for seven years—in 2022.

The Eurozone is sinking deeper into Dragflation, our Top 2022 Trend defined by rising prices and shrinking economic productivity. 

The energy crisis created by the Ukraine war and Western sanctions will prolong not only inflation, but also the continent’s recession, realizing the ECB’s fears that inflation will become embedded across the economy.