The War in Ukraine and the European Central Bank

European monetary policymakers face tough choices regarding the inflation and uncertainty fuelled by the war in Ukraine. They need to bring an end to the large-scale asset purchases and negative interest rates that have been the bulwarks of monetary-policy accommodation since 2015. They must also ensure that European monetary policy can be applied across countries while holding down the differences in sovereign borrowing costs between those governments that are financially strong, such as Germany, and those that are in a weaker position, such as Italy. Any solution to the problem of widening borrowing costs that is consistent with fighting inflation will impose losses on the central banks of stronger countries, while making it cheaper for those governments that receive support to borrow. Whatever it decides, the European Central Banks's Governing Council does not have to be political to be perceived by the European public as making a political choice.