FRANKFURT, Reuters – These are the key remarks made by ECB policymakers prior to a critical Dec 16 policy meeting. This will determine the bank’s policy stance after March’s end of emergency bond purchases.

There is a clear division between rate-setters, who are emphasizing the growing danger of inflation in the euro zone at 4.9%, the highest level recorded since 1997. And those who argue that this spike in price rise will recede on its own.

THE INFLATION DOES

CHRISTINE LAGEDE, ECB PRESIDENT. NOV 19

When faced with supply-driven or passing inflation shocks, we must be careful not to rush to tighten our belts.

“When inflation pressure is expected to fade – as is the case today – it does not make sense to react by tightening policy. After the shock is over, the tightening of policy would have no effect on the economy.

PHILIP LANE CHIEF ECONOMIST NOV 8

A sudden tightening in monetary policy would not reduce the current high inflation rates, but it would slow down the economy, reduce employment over the next few years and thus reduce the medium-term inflation pressure.

We believe that inflation is still below our target of 2% in the medium term, so it wouldn’t be productive to increase monetary policy right now.

“A one-time shift in wage levels as part of adjustment to a temporary unexpected price increase does not necessarily indicate that there is a trend change in the direction of underlying inflation.”

PABLO HERNANDEZ DE COS. BANK of SPAIN GOVERNOR. NOV 29

We are not likely to see interest rates rise next year, or for some time after that.

“In this current environment, I believe it’s better to be cautious when we adjust our monetary policies.

“We try to avoid excessive tightening of the monetary policy as a response to inflation exceeding target. Such deviation is temporary.”

THE INFLATION HAWKS

ISABEL SCHNABEL ECB BOARD MEMB, NOV 22

“Inflation risks are tilted to the positive.”

I wouldn’t commit (to a policy position) for too long. That would be a mistake.”

JENS WEIDMANN BUNDESBANK President, Nov 24

According to my view, the upside risks (the inflation outlook), clearly predominate and are now more apparent.

Companies’ complaints regarding labour shortages are on the rise, not only in Germany but among European neighbors as well.

These tensions could lead to employees being able to demand higher wages in the future.

KLAAS KNOT DUTCH-CENTRAL BANK GOVERNOR (NOV 9).

“These temporary inflation pressures do not last forever. We have discovered that these inflationary pressures last for longer than we thought.

We cannot give long-lasting, unconditional commitments which might be incompatible with the evolution of the inflation outlook.

SWING VOTERS

LUIS DE GUINDOS ECB VICE PRESIDENT. NOV 30,

“In 2022 bottlenecks could last for longer than anticipated. As a result, there’s a risk that inflation will not go down as quickly and as much as we predicted.

“I’m confident that those net purchases will continue throughout next year. Beyond that, I don’t know.”

FRANCOIS VILLEROY DE GALHAU – BANK of FRANCE GOVERNOR, NOVE 22

“Flexibility (of asset buying) is just as important than volume. This is why increasing the net purchases of APP after PEPP is at this stage a possibility, but not yet a necessity. Because PEPP offers flexibility in three aspects, it has proven to be a success. Timing is the first. It is not fixed how much each month. This flexibility could be easily transferred to APP.

We should stop the PEPP net purchases by March 2022. We will do what we said, and as it is already expected by the financial markets, one should not fear too much “cliff effects”.