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Headquarters of the ECB in Frankfurt (Main)
Photo: Daniel ROLAND / AFP
In view of the 8.7 percent inflation rate in January, the demands on the Federal Government and the European Central Bank (ECB) to take stronger countermeasures are increasing.
Economics Ulrike Malmendier told the "Welt am Sonntag" (WamS) that she was "very worried" about the high inflation in Germany.
»The crisis is not over yet, core inflation is still too high«.
She called on the federal government to tailor its crisis aid for the population more precisely.
Relief such as the tank discount is "not bad in principle" just "not accurate".
But that's exactly what it's about.
Anyone who distributes money with a watering can "in turn boosts prices."
"We should define exactly which households we want to reach with which measure," criticized the professor, who teaches at the University of California in Berkeley.
The German approach means that every crisis – whether Covid or high energy prices – is followed by a large spending program.
Advantage is the clear signal of "We can do it," says Malmendier.
“At the same time, we run the risk of wasting inaccurately too much money.
After all, we also want to be prepared for the next crisis.«
Deutsche Bank CEO Christian Sewing, meanwhile, considers further interest rate hikes to be “absolutely” necessary in the fight against high inflation.
»The inflationary risks are still great.
Energy costs can easily rise again, and China's opening up can also give prices a temporary boost," Sewing also told WamS.
Higher interest rates make loans more expensive.
This can slow down demand and thus counteract high inflation rates.
At the same time, higher interest rates on loans can lead to investments being postponed and thus economic growth being weaker.
At the beginning of February, the ECB raised interest rates in the euro area for the fifth time in a row and announced a further increase of 0.5 percentage points for the March 16 meeting.
The key interest rate in the euro area is now 3.0 percent.
According to Sewing, high interest rates are a burden for heavily indebted euro countries such as Italy.
However, the consequences of persistently high inflation are “much more serious than the higher financing costs for some countries”.
If inflation stays high, private consumption will collapse "sooner or later."
He currently sees this as the greatest danger for the German economy.
"But I'm optimistic that we can avoid this scenario."
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