Mario Centeno, a member of the European Central Bank's Governing Council, warned on Monday that there was uncertainty about inflation that required constant monitoring, but that new anti-COVID 19 lockdowns in Europe should not result in price increases.

He told reporters that while confinement and other consequences of rising infection rates were concerning, they "should not lead to an increase in inflation, on the contrary."

We have to remain cautious," he added.

While lockdowns and other consequences of the surging infection numbers across Europe were worrying, he said these "should not lead to an increase in inflation - on the contrary".

According to sources close to the debate, ECB policymakers meeting last week sought a greater acknowledgment of inflation risks, but the bank has stuck to its narrative that price growth will fall back below the target level on its own in late 2022.

Eurogroup chief Mario Centeno promises a fresh response for the embattled region

Centeno said that "inflation, in general, is highly dependent on reducing the impact of factors that remain temporary" such as high energy prices, supply bottlenecks, or the impact of the pandemic on the economy. "The effect of the pandemic is still present and the economic and financial consequences of the pandemic will only unfold over time."

In its financial stability report released on Monday, the Bank of Portugal said the ECB was in "a complex situation because a premature normalization of monetary policy will have a negative impact on the economy" when the recovery is not complete. "This can lead to abrupt corrections in financial markets," it said.

However, removing monetary stimulus too late could lead to "an accumulation of vulnerabilities, in a context where there are signs of exuberance in the financial asset and residential real estate markets at an international level".