Europe at Risk of Higher Inflation; ECB’S PEPP Should End in March: ECB’s Knot

FRANKFURT—Euro zone inflation could exceed expectations in the short and medium term, and this outlook for price growth warrants an end to the European Central Bank’s emergency bond purchases next March, Dutch central bank chief Klaas Knot said on Thursday. Inflation has surged this year on a long list of one-off developments but a growing number of observers, including the International Monetary Fund, warned recently that price rises could be stickier than once thought and may become more permanent. “The risks for headline inflation are again tilted to the upside,” Knot said in a speech. “Upside risks, in the short to medium term, are mainly linked to more persistent supply side bottlenecks and stronger domestic wage-price dynamics.” Knot, a hawk on the ECB’s Governing Council, argued that even if these upside risks do not materialise, the bank’s baseline projection alone warrants an end to the 1.85 trillion Pandemic Emergency Purchase …

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