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Bundesbank boss Joachim Nagel: »Interest rates could rise this year«
Photo: Nils Thies / Deutsche Bundesbank / dpa
Bundesbank President Joachim Nagel is urging the European Central Bank (ECB) to react quickly to the high inflation – and believes that a turnaround in interest rates is possible this year.
"If the picture doesn't change by March, I will advocate normalizing monetary policy," the economist, who took over as chief of the German central bank in January, told the weekly newspaper Die Zeit.
"In my estimation, the economic costs are significantly higher if we act too late than if we act early," Nagel said.
This has also been shown by past experience.
Otherwise, he warned of severe consequences on the stock markets: “If we wait too long and then have to act more massively, the market fluctuations can be stronger.”
Inflation in 2022 at well over four percent
Nagel said his experts were expecting a price increase of well over four percent on average for Germany in 2022.
Last year, the rate of inflation, fueled by high energy prices, averaged 3.1 percent for the year.
First, the purchases of government and corporate bonds would have to stop.
“The first step is to end net purchases of bonds throughout 2022.
Then interest rates could rise this year,” he said.
Higher inflation weakens the purchasing power of consumers because they can then buy less for one euro than before.
At the beginning of the current year, inflation was unexpectedly high at 4.9 percent after 5.3 percent in December.
Inflation is an important indicator for the monetary policy of the European monetary authorities.
The central bank is aiming for an annual inflation rate of 2 percent in the euro area and is at least temporarily willing to accept a moderate overshoot or undershoot.
Critics accuse the ECB of fueling inflation with its ultra-loose monetary policy, which it actually wants to keep in check.
After the most recent monetary policy meeting, ECB President Christine Lagarde admitted that Europe's monetary watchdogs were also becoming concerned about the unexpectedly high inflation rates.
The ECB plans to reassess the situation in March based on new data.
hey/Reuters
