Austrian central bank governor and European Central Bank governing council member Robert Holzmann said on Monday that it was very unlikely that inflation in the Eurozone would return to or fall below 2.0% in 2022, according to Reuters citing Handelsblatt. Holzmann added that inflation is set to reach its peak sometime around the turn of the year. 

On rate hikes, Holzmann said that the ECB should keep open the option of raising interest rates prior to the end of its net bond purchases. "In certain situations," he said, "it may make sense to increase interest rates, but still provide the markets with liquidity through bond purchases."

On the outlook for the economy, Holzmann sees uncertainty as elevated right now due to the new emergence of the new Omicron Covid-19 variant. "In the next two to three weeks," he said, "we may already know more what it means from a medical point of view... But I remain optimistic that we are only seeing a dent in the economic recovery and not a broad downturn."

Market Reaction

The euro has not seen any reaction to the latest comments from ECB's Holzmann. The main theme regarding the ECB right now is what the bank will opt to do with its QE programme once the PEPP expires in March next year. ECB officials have signaled that an extension of the PEPP is not on the cards, despite a recent worsening of the Covid-19 (delta variant) infection rate in the Eurozone and the emergence of Omicron.