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ECB President Christine Lagarde: "Medium-term" below the two percent target
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According to ECB President Christine Lagarde, the phase of increased inflation in the euro area could last longer than expected.
Although the central bank continues to assume that the supply chain problems will be gradually resolved in the course of the coming year, Lagarde said on Monday in a hearing before a committee of the European Parliament.
"But the decline will take longer than originally thought."
If energy prices continue to rise and supply problems persist, inflation could be higher for a longer period of time.
It is assumed, however, that inflation will remain below the two percent target "in the medium term," said Lagarde.
She did not give a more precise period.
The inflation rate in October in the eurozone was 4.1 percent, well above the target value.
Lagarde also referred to the uncertainty caused by the corona pandemic.
"The challenge is not over yet," said Lagarde.
"Not only the course of the pandemic, but also the decisions made by policymakers will continue to determine the strength of the recovery."
Inflation expected to fall soon in October
In October, Lagarde was even more optimistic.
"Some influencing factors are likely to disappear again soon, such as the price-driving effects that result from disrupted supply chains or the withdrawal of the VAT cut in Germany," she told SPIEGEL at the time.
Monetary policy has no direct influence on these phenomena anyway.
She assumes that the effects are largely temporary and that inflation will fall again in 2022.
Before the committee of the European Parliament, Lagarde did not hold out the prospect of a key rate hike.
It is very unlikely that the conditions for an interest rate hike in the coming year will be met.
Banks demand ECB response
Regardless of this, several banks are calling for an end to the low interest rate policy.
"The supposed panacea in recent years - low interest rates at supposedly stable prices - has lost its effect, because now we are struggling with their side effects," said Deutsche Bank boss Christian Sewing on Monday at the start of Euro Finance Week in Frankfurt am Main .
For bank customers, this is noticeable in the form of negative interest for higher credit balances.
"We also see that the subject of inflation is not quite as temporary as it is possibly postulated from political circles," said the new head of HSBC Germany, Nicolo Salsano.
Cornelius Riese, co-head of the leading cooperative institute DZ Bank, recalled that the ECB had warned against deflation in recent years in view of the comparatively low inflation rates at the time, i.e. a fall in prices on a broad front as a risk for the economy.
"For me the question arises: Where is the ECB's awareness of the problem, what is synchronized with the topic of inflation?" Said Riese.
sol / dpa / Reuters
