The ECB could raise interest rates this year, says the new head of the Bundesbank

LAST UPDATE 13:15

The European Central Bank could raise interest rates this year as inflation turns out to be higher than originally estimated, Bundesbank President Joachim Nagel said in an interview with Die Zeit.

“If the image [στον πληθωρισμό] “It will not change until March. I will support the normalization of monetary policy,” said Nagel, who took over as head of the Bundesbank in January.

“The first step will be to end clean markets [περιουσιακών στοιχείων] during 2022, “he added.” Then interest rates could rise this year. ”

The new chairman of the Bundesbank did not deviate from the traditionally conservative line of the German central bank, emphasizing that if the ECB delays in taking action to normalize its policy, the costs may prove to be very high.

“If we delay taking action, we will have to raise interest rates more and faster. Financial markets would then react with even greater volatility,” he warned.

Nagel also said that inflation in Germany, the eurozone’s largest economy, is expected to exceed “significantly” 4% this year, more than double the ECB ‘s target of 2% and the Bundesbank itself’ s forecast of 3.6%.

“There are indications that the rise in energy prices may be more persistent, further affecting prices for food and other services, while the strengthening of demand is behind [από τις πληθωριστικές πιέσεις]”, he said.

Nagel is the second ECB official after the governor of the Dutch central bank, Klaas Knot, to openly discuss the possibility of the central bank raising interest rates this year.

The ECB has announced that it will continue to gradually reduce the rate of asset purchases in the coming months and will stop net purchases under the emergency pandemic (PEPP) program at the end of March.

At the same time, the central bank has announced that net purchases under the APP program will continue “for as long as necessary”.

The Governing Council of the ECB expects the net purchases to end shortly before interest rates begin to rise. This means that in order to raise interest rates this year, the ECB will have to change its forecasts for the course of net markets in the coming months, as analysts estimate.

Source: Capital

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