The president of the Bundesbank, Joaquim Nagel, has pointed the way to the European Central Bank (ECB) in an interview in ‘Financial Times’: more rate hikes, a more restrictive monetary policy. In his opinion, the fight against inflation “is not over” and, if it wants to be tamed, the institution chaired by Christine Lagarde should continue raising interest rates.
“If we want to tame this stubborn inflation, we will have to be even more stubborn,” the head of the German central bank has defended in the British newspaper, who urges them to continue raising interest rates. For the president of the Bundesbank, the inflation rate in the euro zone should still fall “significantly and sustainably” from the real 8.5% before the central bank stops raising interest rates.
In this way, the president of the Bundesbank has spoken in favor of maintaining the ECB’s road map to fight against the escalation of prices coinciding with the meeting of the Federal Reserve of the United States, which this Wednesday could announce a rise of 25 points of its reference rate, despite the recent turmoil in financial markets.
For the president of the Bundesbank, the inflation rate in the euro zone should still fall “significantly and sustainably” from the real 8.5% before the central bank stops raising interest rates. “There is still a ways to go, but we are approaching restrictive territory.” he has concluded.
“We are not facing a repeat of 2008”
Regarding what has happened in recent days in the financial system, with the Credit Suisse rescue agreed last weekend, Nagel has pointed out that it is possible that banks are “more cautious” in lending, although he has added that it is too early to draw conclusions and minimize the risks of contagion for euro area banks. “We are not facing a repeat of the financial crisis that we saw in 2008,” the president of the Bundesbank has been forceful. “We can handle this,” he added.
The latest Bundesbank projections assume that the German economy can contract again in the first three months of 2023, which added to the 0.4% decline in the fourth of 2022 will put the ‘European locomotive’ into a technical recession.
