This week brought more bad news for the euro-zone economy, with the surge in cases and spread of the Omicron variant casting a shadow over services sector activity. While recent restrictions have brought down cases in Germany and Austria, there is a clear risk that this goes into reverse in the coming weeks and that consumers become more cautious. Against this more uncertain backdrop, while we expect the ECB to announce next week that it will end its PEPP purchases in March, it will also say it is prepared to be more flexible in future.
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