Metzler Economist Urges ECB to Maintain Policy Flexibility Amid Price Shocks

An economist at Metzler Asset Management said the European Central Bank should focus on anchoring market expectations rather than reacting to every price surge. According to Jin10, Edgar Walk argued in a report that the ECB’s role is to keep markets confident that temporary shocks will not be permanently monetized. He said this approach leaves the central bank in a dilemma. If the ECB responds too weakly, it may appear to treat rising inflation as a one-off energy-related incident and fail to take it seriously. If it responds too aggressively, it could add pressure to an already fragile European economy. Walk added that the appropriate response is not to issue bold forward guidance, but to preserve credible policy flexibility.