German inflation is likely to strengthen further than previous estimates and the ECB should maintain its focus on streamlining monetary policy, said Bundesbank President Joachim Nagel.
With inflationary pressures intensifying long before the Russian invasion, the ECB seemed almost certain that it would accelerate its exit from the support program at its March meeting.
In February, eurozone inflation jumped to a record high of 5% in the previous month.
But the conflict in Ukraine has overturned the ECB’s plans, leaving its decision on March 10 pending.
“If price stability requires it, the ECB’s board needs to adjust its monetary policy stance,” said Nagel, who took over in January at the German central bank’s annual general report.
However, he did not mention the need for the ECB to limit its support program to 10 March.
Nagel, like other ECB hawks, has called for a faster normalization, including a faster decline in bond markets, but seems to be backing down after the outbreak of war.
“The war is likely to affect the German economy, mainly through energy prices, foreign trade and growing uncertainty. How strong the influence will be cannot be reliably assessed at this time,” he said.
Source: Capital
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