The rise in inflation in the eurozone is not entirely temporary and the risks are expected to outweigh the estimates, said the new chairman of the Bundesbank, Joachim Nagel, challenging the ECB’s account of price pressures.
The remarks, made at his inauguration, are Nagel’s first as head of the German central bank, which has traditionally been much more concerned about inflation and risk.
“It is true that high inflation rates can be attributed to specific effects that end automatically. But not completely,” Nagel said.
He added: “I see the risk that inflation will remain high for longer than expected.”
Eurozone inflation hit a record high of 5% last month, but the ECB has downgraded the rate, arguing that energy prices are largely responsible and that wage growth will be below the 2% target by the end of the year. , even without policy tightening.
The Bundesbank has long challenged this narrative, warning that the inflation profile is not so favorable, and Nagel appears to be aligning with his predecessor Jens Weidmann, who resigned five years earlier.
Nagel, 55, warned that inflation was hurting the poorest and vowed to remain a proponent of price stability.
“People in Germany rightly expect the Bundesbank to be a proponent of a culture of price stability. I can assure you that it will stay that way,” he added.
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Source From: Capital
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