Bundesbank President Joachim Nagel considers further interest rate hikes in the euro area to be necessary in view of the persistently high inflation rates. “Interest rates must continue to rise,” said Nagel in an interview published on “Spiegel Online” on Wednesday.
I wouldn’t be surprised if we have to keep raising interest rates even after the two steps that have been announced.
Joachim NagelBundesbank President
The European Central Bank (ECB) has raised interest rates in the euro zone four times in a row since July, and the key interest rate is now 2.50 percent. “For February and March we announced that we would raise interest rates again sharply,” affirmed Nagel, who has a say in the ECB Council’s monetary policy course. “I wouldn’t be surprised if we have to keep raising interest rates even after the two steps that have been announced.”
The ECB is aiming for price stability in the euro area in the medium term with an inflation rate of two percent. Rising interest rates can dampen inflation because credit becomes more expensive and that slows demand.
In December, the price pressure eased somewhat, but consumer prices in the euro area were still 9.2 percent above the level of the same month last year. In Germany, inflation was calculated at 8.6 percent for December.
“You have to be careful not to sing the swan song to high inflation too soon. It wasn’t surprising that the rate would drop in December,” Nagel said. “Despite the decline, inflation is still far too high.” The next monetary policy meeting of the ECB Governing Council is on February 2nd. (dpa)
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Source: Tagesspiegel
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