ECB refrains from acting on surging inflation

The European Central Bank (ECB) on Thursday kept its stimulus policy intact and ultra low interest rates unchanged as the economy in the eurozone continues to recover, reported Xinhua.

The ECB's decision shows that the institution is confident that the combination of low interest rates and the twin asset purchase programs will prop up economic recovery in the European Union (EU).

ECB President Christine Lagarde struck an upbeat tone at a press conference here on Thursday. Supported by the waning impact of the COVID-19 pandemic, recovery in domestic and global demand and improvement of the labor market, the eurozone economy was on the path of strong recovery in the third quarter of 2021, Lagarde said, adding that the momentum of growth slowed down to some extent.

"We still expect output to exceed its pre-pandemic level by the end of the year," she said in a press release.

The inflation rate in the eurozone ballooned to 3.4 percent in September, mirroring an upward trend in other parts of the world, which has already fuelled concerns and, in some countries, interest rate hikes.

Lagarde played down the threat of increasing interest rates. The ECB conceded that higher inflation will last longer than expected and said it expected it to decline in the course of 2022 before going climbing up again.

The ECB has made it clear that it would allow inflation to hover above its medium-term target of two percent for "a transitory period."

Unlike some of its peers that are already weighing winding down stimulus, the ECB pledges to keep the Asset Purchase Program (APP) and the Pandemic Emergency Purchase Program (PEPP) going at their current paces.

Net purchases under the APP will continue at a monthly pace of 20 billion euros and the PEPP will be conducted with a total envelope of 1,850 billion euros until at least the end of March 2022.