FRANKFURT—The European Central Bank is likely to keep its key interest rate in negative territory for at least another year despite surging inflation in the eurozone, signaling a divergence with central banks such as the Federal Reserve that are already moving to phase out easy-money policies amid rapidly rising prices.
A combination of high inflation and softening economic growth is posing a dilemma for central banks. They want to keep their monetary stimulus in place long enough to ensure a strong recovery from the Covid-19 shock, but not so long that consumer-price growth becomes unmanageable. Inflation has surged to multidecade highs in the U.S. and other countries in recent months, driven by booming demand and supply-chain bottlenecks as economies reopen.