Inflation crashes the party as European Central Bank marks 25 years

The European Central Bank celebrates its 25th anniversary on Wednesday but soaring inflation in the eurozone threatens to put a damper on festivities at the Frankfurt-based financial institution.

To mark the occasion, around 200 guests will descend on the ECB's imposing steel-and-glass tower on the banks of the Main river in Germany's financial capital.

With music from French composer Claude Debussy playing, ECB president Christine Lagarde will cut a cake as she is joined by two of her predecessors, Jean-Claude Trichet and Mario Draghi.

But against a challenging economic backdrop, the mood may not be as jubilant as ECB bosses hoped.

Inflation in the eurozone surged to record highs over the past 12 months, as Russia's invasion of Ukraine drove up energy prices and the recovery from the Covid pandemic caused widespread supply chain woes.

The closely watched indicator sat at seven per cent in April -- down from a peak of 10.6 per cent in October, but still well above the ECB's two-per cent target.

Nevertheless, Lagarde has sought to strike an upbeat tone ahead of the anniversary, insisting last week there was a "strong cause for celebration".

"Twenty five years ago we had the objective of providing price stability, delivering better European sovereignty, and showing more solidarity," she said on Dutch TV show Buitenhof last week. "I think on those three accounts, we have delivered."

The ECB came into being in 1998, a few months before the introduction of the euro the following year.

Since the single currency was established, the eurozone's GDP per capita has more than doubled and unemployment has fallen to record lows.

And despite recent highs, inflation has averaged 2.05 per cent over the ECB's quarter of a century in existence -- not far off the central bank's target.

But some critics may be more focused on what they see as the bank's latest missteps, namely, that it was too slow to start hiking interest rates, believing high inflation was temporary.

Ultimately, policymakers were forced to embark on an unprecedented campaign of monetary tightening -- lifting key rates 3.75 percentage points since July last year, with more increases expected.

Still, it is far from the first fire the ECB has had to fight -- from the eurozone's sovereign debt crisis, which rumbled through the 2010s, to a long phase of inflation that was well below its target.