Inflation, which has been high for months, is eroding people’s purchasing power. It is important to “resolutely oppose it,” said Joachim Nagel on Monday.
Bundesbank President Joachim Nagel sees politics and business as having a duty in the fight against high inflation. There is no doubt that monetary policy must “clearly and resolutely counter high inflation with interest rate hikes,” affirmed Nagel at a symposium in Frankfurt on Monday. “Central banks cannot do it alone.” A stability-oriented monetary policy can only be successful in the long run “if other players in politics, business and society also work towards this stability goal”.
In politics, Nagel sees solid public finances with limited debt as starting points for stable prices. In addition, it is important to limit “excessive market power” of companies, because a lack of competition could lead to excessive prices. Finally, the collective bargaining partners could contribute to price stability by “judgment”. If wages rise too much in response to high inflation, this can push prices further up, as companies justify further price increases with higher wage costs.
Inflation, which has been high for months, is eroding people’s purchasing power. In April, inflation in Germany slowed for the second month in a row, but at 7.2 percent the inflation rate was still comparatively high. The European Central Bank (ECB) is aiming for price stability in the euro area with two percent inflation in the medium term. With a series of interest rate hikes, the euro currency watchdogs are trying to curb the still high inflation.
“I am convinced that we central banks will consistently continue on this course,” said Nagel. If politics and business would also live up to their responsibilities, “then the phase of high inflation will soon be behind us”.