>> GROUP: Shadow ECB Council / EZB-Schattenrat  Jan Mallien

Jan Mallien: The majority of members of Handelsblatt's Shadow ECB Council believe that before taking further steps to normalize monetary policy, the ECB should first wait until it is clearer what the consequences of the war in Ukraine are for the euro area economy. Several members noted the need for flexible asset purchases given currently high uncertainty. However, there were also individual members who called for an end to net bond purchases this year. One member also called for rate hikes.

Members of the Shadow ECB Council revised their inflation forecast for 2022 upward from 2.3 percent to 4.6 percent. They also revised their forecasts upward for 2023 from 1.5 to 2.0 percent and for 2024 from 1.7 to 2.0 percent. The members reduced their GDP forecast for 2022 from 4.0 to 3.5 percent. They expect that the economic effects of the Russian war against Ukraine will primarily be reflected in significantly higher energy prices. This is likely to drive inflation in the euro area further up. This together with increased uncertainty and a possible decline in private sector sentiment could weigh on growth. However, the effect on growth is unlikely to be as strong as on inflation.

On monetary policy, most members recommend that the ECB should not yet commit to an end of net asset purchases via the APP program or rate hikes this year. From their point of view, it is important to remain flexible because of the high degree of uncertainty. There were also dissenting voices representing the need to act now due to high inflation.

More information on the views of the Shadow ECB Council, including members' individual rate recommendations, is available in the download document. Statements by individual members are posted below.

+++ Background: The Shadow ECB Council was founded in 2002 upon an initiative of Handelsblatt, the German business and financial daily. It is an unofficial panel, independent of the ECB/Eurosystem, and comprising prominent European economists drawn from academia, financial institutions, consultancies, companies and research institutes. The Shadow Council usually convenes by telephone conference on a quarterly basis. Its discussions take place prior to the official ECB Governing Council "policy" meetings. +++
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