“More rate hikes are needed to bring inflation back to two percent,” Nagel said on Tuesday, according to the transcript at the start of a central bank symposium in Frankfurt. The inflation rate is well above this target, which has been set by the European Central Bank (ECB) for months.
The longer inflation stays high, the harder it is for monetary policy to restore price stability. “And that would increase the risk of inflation becoming high in the medium term,” Nagel warned.
“Therefore, as the Governing Council, I will continue to work so that we do not give up too soon, and continue to stubbornly normalize monetary policy – even if our measures reduce economic development,” said the Bundesbank Chairman. The ECB Governing Council decides the monetary policy in the euro area.
“Because in a situation where monetary policy falls behind the curve, overall economic costs would be significantly higher,” Nagel continued. The rise in energy and food prices for months fueled inflation. In October, consumer prices in the euro area increased by 10.7 percent compared to the same month of the previous year.
Inflation in Germany rose to 10.4 percent in October. “The inflation rate in Germany is likely to remain high next year. In 2023, on average, it’s likely to be seven before the decimal point,” Nagel predicted. “In any case, the inflation rate for Germany should remain high for a longer period of time.”
(SDA)