“Of course not everyone likes it”
Bundesbank head: ECB should raise interest rates
May 23, 2023, 9:35 p.m
The head of the Bundesbank is posing as a fighter for restoring price stability. To do this, one must also make unpopular decisions, says Joachim Nagel – and calls for interest rate increases from the ECB. Its boss Lagarde recently announced further measures against the high inflation.
According to Bundesbank head Joachim Nagel, the ECB must raise interest rates in the fight against inflation and accept that the economy will be dampened in the process. “Of course not everyone likes that,” he emphasized according to the text of the speech at the Economic Day of the Economic Council of the CDU in Berlin. But even if raising interest rates to a sufficiently restrictive level requires unpopular decisions, the ECB must live up to its mandate. The medium-term goal of the monetary watchdogs for inflation is 2 percent: “No more and no less. And we want to reach this goal as soon as possible.”
Nagel emphasized that he would personally work to ensure this: “You can rest assured that I will not let up until price stability is restored,” he said at the conference. The course of tightening monetary policy has not yet come to an end. Several rate hikes are still needed to reach a sufficiently restrictive level: “Our job isn’t done yet.”
At the beginning of May, the ECB’s monetary guardians led by central bank chief Christine Lagarde raised interest rates by 0.25 percentage points. The deposit rate that is decisive on the financial markets and that financial institutions receive for parking excess funds has been 3.25 percent since then. It was the seventh rate hike in a row. Numbers eight and nine could follow in the summer: economists surveyed by Reuters expect further small increases of 0.25 percentage points each for the interest rate meetings of the ECB in June and July.
Lagarde recently indicated further steps by the monetary authorities in the fight against persistently high inflation. “We are heading towards more delicate decisions in the future, but we will be bold and make the decisions needed to bring inflation back to 2%,” she told Spanish television channel TVE. “And we will do that, no question,” she added.