Inflation is skyrocketing but the ECB is right not to raise rates

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Inflation in the eurozone has hit the almost mythical European Central Bank sweet spot of 2pc. Pressure in the energy sector suggests the target may soon be completely exceeded, but even as interest rates are raised around the world, the European Central Bank (ECB) is desperate to hold back its fire.

BCE is right to hold the line. The specter haunting Europe is not inflation, it is the lack of long-term growth.

The ECB should only react to inflation if policymakers are convinced – without question – that high inflation is here to stay or that the economy is in danger of overheating.

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