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.