Several ECB politicians have called for a rate hike in July to counter rising inflation. This rose to a record high of 7.5 percent in the 19-country euro zone in April.
Villeroy expects inflation to remain “high” for the remainder of 2022. By 2024, however, the rate of inflation is likely to fall back to around two percent. The ECB has set an inflation target of two percent, which it considers ideal for the economy.
Bundesbank boss for rapid exit from ultra-lax monetary policy
Deutsche Bundesbank President Joachim Nagel is pushing for an early end to the era of ultra-loose monetary policy. In his view, the ECB’s bond purchases could expire as early as the end of June, followed by a timely interest rate hike in July, he said at an event in Berlin on Wednesday. “In any case, the exit from the monetary policy, which is very stimulating to the economy, should take place quickly and smoothly,” says the text of the speech.
The European Central Bank (ECB) must act quickly to avoid second-round effects such as prices and wages escalating and inflation expectations getting out of control. At the same time, it must be ensured that consumers, companies and financial markets can cope with the exit from the very loose monetary policy.
The day before, Nagel had said on the ECB’s interest rate policy that the next thing he wanted to achieve was to move the deposit rate back into positive territory. The focus of monetary policy must then be shifted away from the deposit rate and back to the key interest rate. The deposit rate in the euro area is currently minus 0.5 percent. This means that banks have to pay penalty interest if they park excess funds with the central bank. The key interest rate is currently 0.0 percent.
Source: Nachrichten
