“The course of monetary policy tightening has not yet come to an end,” Nagel said. — Bloomberg
BERLIN: The European Central Bank (ECB) will need more interest rate increases to bring inflation under control, according to Bundesbank president Joachim Nagel.
“The course of monetary policy tightening has not yet come to an end,” Nagel said in Berlin yesterday.
“Several rate hikes will still be necessary to reach a sufficiently restrictive level. And we will then have to maintain this level for a sufficiently long time. Until inflation has come down.”
The central bank is in the midst of its most aggressive tightening cycle ever – it’s raised rates by 375 basis points already and will likely hike by a quarter point at its next two meetings as well.
The Bundesbank chief, one of the ECB’s most hawkish rate setters, was among the first to say that more might be needed after the summer.
Keeping rates high won’t necessarily be popular, Nagel said.
“Especially since a restrictive interest rate level inevitably goes hand in hand with a dampening of economic activity – otherwise it would not be a restrictive interest rate level,” he said.
“But that’s what I meant by the unpopular decisions that monetary policymakers sometimes have to make: for some, interest rates are still too low, for others too high.” — Bloomberg
