Welcome to the latest Eurointelligence podcast. I'm Wolfgang Munchau and with me are Susanne Muncheng and Jack Smith.

Today we want to talk about monetary policy. The ECB has yesterday had a meeting of its governing council and while it did not change monetary parameters, the purchase programs or the interest rates,

it signaled a change in language, a change that it is at least an acknowledgement that it is now

more concerned about inflation than what appeared to be the case a month or two months ago.

The language used to be that inflation was transitory. It's now contemporary. This reminds me a

little bit of the time when John Cleet Treciated, fine-tuned the language when he was president

of the ECB and used lots of code words that had certain signals

with markets. I don't think we're back to the code word period, but there is clearly a shift in

language. And as Christine Lagarde said, they've been talking about nothing but inflation during the

meeting. They're still not alarmed. I would probably say that I'm more alarmed than they are.

You know, I'm still sort of in the 50-50 camp on inflation.

I believe there is a risk that inflation might prove persistent.

We're hearing from industry sources that it might.

Then again, there is the possibility that higher energy prices have a recessionary impact on the economy. It reduces

real earnings of people and that they might therefore reduce their demand for goods and prices

might not rise as much as possible. These are counteracting effects in the economy that need to

play out over the next few years. But I would be very cautious at this stage

to rule out the possibility of higher inflation because inflation is to a large extent a global

phenomenon these days. This is also a point where I disagree with Christine Lagarde that she,

in her assertion that the Eurozone is not a small open economy. Well, technically that's true.

It's not a small open economy.

But I think it is a large open economy as opposed to a large closed economy.

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