High inflation and risk of recession widen ECB dilemma

High inflation and risk of recession widen ECB dilemma

Subject : International relations

Section: International body

Context:

Eurozone (EZ) inflation jumped to another record high and will soon hit double-digit territory, herald in gast ring of big interest rate hikes even as a painful recession appears increasingly certain

Concept:

Eurozone (EZ)

• The eurozone (EZ) is a monetary union of 19 member states of the European Union (EU).
• They have adopted the euro (€) as their primary currency and sole legal tender.

European Central Bank (ECB)

The European Central Bank (ECB) manages the euro and frames and implements EU economic & monetary policy. Its main aim is to keep prices stable, thereby supporting economic growth and job creation.

• Role: To manage the euro, keep prices stable and conduct EU economic & monetary policy
• President: Christine Lagarde
• Members: ECB President and Vice-President and governors of national central banks from all EU countries
• Established in: 1998
• Location: Frankfurt (Germany)

Composition

The ECB President represents the Bank at high-level EU and international meetings. The ECB has the 3 following decision-making bodies:

Governing Council – the main decision-making body.
Consists of the Executive Board (see below) plus the governors of the national central banks from eurozone countries.

Executive Board – handles the day-to-day running of the ECB.
Consists of the ECB President and Vice-President and 4 other members appointed for 8-year terms by the leaders of the eurozone countries.

General Council – has more of an advisory & coordination role.
Consists of the ECB President and Vice-President and the governors of the central banks from all EU countries.