“Expect that to change”
Merz calls for higher interest rates
01/18/2022 10:32 am
The European Central Bank should conduct its monetary policy independently of political influences. However, this does not prevent influential politicians from calling for interest rate increases, for example. The future CDU chairman Friedrich Merz also wants such a step.
The designated CDU chairman Friedrich Merz sees the currently high inflation rate as a long-term phenomenon and calls for a response from the European Central Bank (ECB). “I can only appeal again and again to the ECB to correct its view that this inflation rate is only temporary,” said Merz in Berlin. “The ECB must recognize the problem as not just temporary, then draw the first conclusions with regard to the bond purchase programs and then finally announce interest rate hikes, just like the US Federal Reserve has done.”
The end of the first half of the year would be the right time for this, “because then we have an indicator of how long we have to adjust to high inflation rates,” said Merz, who is to be elected party leader next Saturday. From statements such as those made by Isabel Schnabel from the ECB Executive Board, he gathers that the ECB is apparently in the process of reconsidering its position.
Schnabel said in early January that rising energy prices could force the European Central Bank to take action against inflation. If energy becomes more expensive, this could prompt the ECB to abandon its previous monetary policy.
However, she later stressed that the central bank should not be hasty in raising interest rates. The ECB assumes that inflation will fall significantly in one to three years, she told the “Süddeutsche Zeitung”. “That’s why we mustn’t raise interest rates too early. That could end up stalling the recovery.”
The ECB cannot change anything about the current significant increase in prices. “If we take measures today, they will only take effect with a delay,” said Schnabel. The central bank is even powerless when it comes to oil and gas prices: “Monetary policy cannot lower the oil or gas price.”
High inflation
Inflation in the euro area rose to another record high in December. Goods and services cost an average of 5 percent more than a year earlier. This is the highest value since statistics began in 1997. The ECB recently raised its inflation forecast for the new year to 3.2 percent, almost doubling it. The ECB sees price stability at 2 percent.
“In any case, the signs that we will also have considerable currency devaluation in 2022 are increasing every day.” That’s why the Americans and almost all countries in Europe that didn’t belong to the euro area reacted. “Only the ECB is not reacting. I expect that to change this year.”
When asked how people suffering from high prices could be helped, Merz replied: “First of all, the federal government is responsible here.” In particular, when he hears Economics and Climate Protection Minister Robert Habeck and Social Affairs Minister Hubertus Heil, he “increasingly has the feeling that the federal government is on a path that will make everything considerably more expensive.”
“Therefore, a lot would be gained if the federal government would at least concede that, for example, the galloping energy prices cannot go on like this,” said the CDU economic politician. In any case, the abolition of the EEG surcharge next year is not a solution for this year.