The head of the German Bundesbank pleaded on Friday for a rapid increase in interest rates from the European Central Bank in order to curb soaring prices and considered that “negative interest rates are a thing of the past”.
When you are in an environment of inflation rates around 7% (…), the conclusion is that interest rates must increase, declared Joachim Nagel after a meeting of the G7 in Germany.
It is certain that negative interest rates are a thing of the past, still comments the head of the German central bank.
During their meeting, the finance ministers and central bankers of the seven major powers (United States, Japan, Canada, France, Italy, United Kingdom, Germany) made the fight against inflation one of their priority, as the war against Ukraine has aggravated food and energy price hikes.
We see inflation as a huge danger, stressed German Finance Minister Christian Lindner, whose country chairs the G7, at the final press conference.
This situation has led most of the major central banks, including the American Federal Reserve, to raise their key rates, which have been at historic lows for years, in a context of price stagnation that is now over.
The ECB, after being more wait-and-see, is now preparing the ground for a rate hike which should take place in July, which would mark the beginning of the end of easy money in the euro zone.
After the end of the ECB’s asset purchase programme, the first interest rate hike could come perhaps in July, Nagel confirmed on Friday.
Other increases could follow shortly after, added the head of the Bundesbank.
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The latter is one of the hawks advocating a stricter monetary policy within the Governing Council, the decision-making body of the ECB.
The ECB has not had a rate hike since 2011.
The dynamics of inflation have changed profoundly in a very short time, which has led to a change in monetary policy in most G7 countries, further observed Mr. Nagel.
Monetary policy must remain vigilant and take additional measures if necessary to ensure medium-term price stability, he pleaded while some economists warn against the risk of weakening activity by raising interest rates too suddenly. interest.