© . Small figurines are seen in front of the displayed word “Inflation”, EU flag and rising stock chart in this illustration, taken on February 11, 2022. REUTERS/Dado Ruvic/Ilustration by Balazs Koranyi and Francesco Canepa FRANKFURT () -The European Central Bank is is likely to make as few policy commitments as possible on Thursday as the shock of Russia’s invasion of Ukraine swells expectations for the economy and leaves policymakers grappling with new realities. With inflation in the eurozone at an all-time high even before Moscow launched its attack on Feb. 24, policymakers were expected to announce an end to years of incentives to print money, paving the way for an interest rate hike by the end of the year. . But the war has shattered that consensus and the ECB’s 25-member Governing Council will enter the meeting divided, increasing the chance of a policy surprise – and the risk of a mistake. “No one can seriously expect the ECB to normalize monetary policy at such a time of great uncertainty,” said ING economist Carsten Brzeski. The safest route appears to be for the bank to confirm an earlier decision to continue cutting bond purchases next quarter, while all other commitments, including an end date for purchases and the timing of an interest rate hike, are up in the air. left. “We think the ECB will try to buy some time by continuing the previously planned phasing out in April… said economist Anatoli Annenkov. To do this, the ECB will probably remove a provision that a rate hike is “short” after the end of bond purchases, it is also expected to drop any reference to a rate cut in its guidance, some policy hawks will nonetheless urge the ECB to at least move its stimulus and return policies to a “neutral” one setting so that the bank could announce the end of bond purchases in the coming months, a decision that would increase the chances of — but not cement — a rate hike in 2022. Inflation in the 19 countries that use the euro, could be three times the ECB’s 2% target this year and is likely to remain high next year. decades should also prompt the ECB to abandon its ultra-easy policy stance and end a nearly decade-long experiment with unconventional stimulus. The Federal Reserve is sticking to its plans to raise US interest rates next week and heralds a series of hikes in borrowing costs as inflation rises. But the conflict in Ukraine, the unprecedented sanctions imposed by Western countries against Russia and rising commodity prices will all add to uncertainty, dampen growth and undermine household purchasing power, adding to the reason for caution. Economists polled by do indeed expect the ECB to wait until the final months of this year for its first rate hike in more than a decade. [POLL/] Money market price in a 30 basis point increase in the ECB’s deposit rate by December, which would bring it to minus 0.2%. The ECB has kept its deposit rate below zero, effectively forcing banks to park their idle cash since 2014 to combat then-sluggish inflation in the eurozone. STRUCTURAL CONCERNS As things get going on Thursday, high inflation makes the removal of stimulus almost inevitable, but the real issue is how a shifting world order will affect prices further afield, a time horizon more relevant to the ECB. High energy prices will slow growth and could curb inflation in the longer term, as households have less to spend on other things and businesses postpone investment. This is why the ECB’s inflation projection for 2024 is unlikely to differ much from the 1.8% it forecast three months ago. These predictions have been so unreliable in recent months that policymakers are now openly questioning them, rendering them less relevant in decision-making. The war in Ukraine is also likely to trigger economic forces that could push prices further afield. Increased defense spending, as outlined by several eurozone members, and a faster green transition to phase out the bloc of Russian gas are likely to boost both government spending and inflation. These could also be supported by joint issuance of European Union debt, and the bloc would likely look to the ECB to keep borrowing costs down. However, it is nearly impossible to quantify the inflation costs of these long-term decisions, so the ECB’s projections will not reflect them, even if policymakers are likely to bring them up in the debate.