Inflation is on the rise and there’s a new omicron Covid variation expected to spread throughout the region. The European Central Bank must present its outlook for policy in 2022.

In November, the price of living in the Euro Area (the 19 countries that have the euro) rose to a record 4.9%. Omicron appears likely to be the predominant coronavirus strain. Some European economies are already dependent on the delta variant.

Dirk Schumacher of Natixis was an ECB monitor and wrote that there has been a sharp increase in inflation and infections. He also noted the emergence Omicron’s new variant. This means the Governing Council might need to take more time to adjust its non-conventional policies. 

Christine Lagarde led the establishment that created a new bond-buying programme in response to the March 2020 coronavirus. This was in order to help the eurozone. In March 2022, the PEPP’s total amount is expected to reach 1.85 trillion euros ($2.19 TILLION).

Despite the current pandemic, which is currently at a pace of 20 million euros per month, the ECB kept its asset purchasing program (known as APP). To sustain 19 member economies, the central bank used this program together with PEPP.

Schumacher said that Natixis expects an announcement about the end of the PEPP program by March. “We expect a clear indication that the APP is being used in a more flexible manner.”

This week’s main focus will be on the latest staff projections regarding inflation and growth. These projections show whether inflation targets of 2% can be achieved in the medium-term, which is the primary mission of the ECB. 

“I can see an inflation profile that is like a big hump. “So it has evidently increased over the previous three quarters and that is why we are so painful about it,” Lagarde told a Reuters conference in Dec. 3 

She said, “And eventually, a hump declines. And this is what I project for 2022.”