Burst of rising prices tests European Central Bank

FRANKFURT, Germany (AP) — European Central Bank officials are confronting the highest inflation in more than a decade and supply shortages that are holding back the pandemic recovery as they decide monetary policy Thursday for the 19 European Union countries that use the euro currency.

The meeting of the 25-member governing council isn't expected to result in changes to the bank's 1.85 trillion ($2.14 trillion) bond purchase program aimed at getting the economy through the COVID-19 pandemic.

But it could lay the groundwork for a December decision on the program that drives down longer-term borrowing costs, easing credit for businesses and supporting growth and jobs. The purchases are slated to run at least through March, so any change in December would take effect next year.

A news conference from President Christine Lagarde will provide another chance for her to underline the bank's stance on the recent burst of inflation and what lasting effects it might have. So far, she has made it clear that the bank considers the higher prices to be temporary and said the bank won't “overreact” by easing its efforts to keep interest rates low for businesses, governments and consumers.

She is expected to argue that the economy still needs extensive support. The bloc of countries using the euro has not yet reached its pre-pandemic level of output, unlike the U.S., which has seen a robust recovery following more extensive government spending.

Shortages of supplies like computer chips for cars have hindered the industrial recovery, with Germany this week lowering its growth outlook for the year to 2.6% from 3.5%. The eurozone as a whole grew by 2.2% in the second quarter over the quarter before, exiting a double-dip pandemic recession. Third-quarter figures are due Friday.

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