FRANKFURT: Rising eurozone inflation provides the backdrop for the meeting of European Central Bank governors Thursday, with markets hoping for hints when policymakers might start easing their massive pandemic-era stimulus.
As the economic recovery gathered steam in the 19-nation club, consumer prices rose in August at a pace not seen in the past decade, climbing beyond three percent - overshooting the ECB's new two-percent target.
ECB president Christine Lagarde previously promised to "look through" the surge and policymakers expect the rate to rise even further in coming months before falling back.
"We are more worried about the inflation rate being too low in the medium term rather than too high," Isabel Schnabel, a member of the ECB's executive board, said last month.
The ECB considers the jump in consumer prices to be driven by one-off, pandemic-related effects as energy prices recover and policies aimed at mitigating the economic impact are rolled back.
As such, observers do not expect the ECB's governing council to touch historically low interest rates or announce any significant change to their colossal bond-purchasing programme, despite some grumbling among its 25 members.
Jens Weidmann, the president of the German Bundesbank, urged the ECB in August not to ignore the risk of a higher inflation outlook, and said the ECB must stand ready to gradually scale back its bond-buying.
"Even if some ECB hawks re-emerged over the last days, we don't expect their pushback to be strong enough to deliver any changes to the ECB's monetary policy stance," ING bank economists Carsten Brzeski and Antoine Bouvet said.
The ECB last year launched a 1.85-trillion-euro ($2.2 trillion) pandemic emergency bond-buying programme (PEPP) to help the euro region weather the coronavirus crisis.
The huge asset purchases, scheduled to run until March 2022, are aimed at keeping borrowing costs low to keep credit flowing and boost economic growth.
The ECB will on Thursday also unveil the latest quarterly growth and inflation forecasts, but analysts expect few surprises.
The inflation outlook is predicted to stay roughly unchanged, at 1.5 percent in 2022 and 1.4 percent in 2023 - keeping the ECB's 2.0 percent goal well out of reach.