(Bloomberg) — Sign up for the New Economy Daily newsletter, follow us @economics and subscribe to our podcast.
(Bloomberg) — Sign up for the New Economy Daily newsletter, follow us @economics and subscribe to our podcast.
European Central Bank Governing Council member Joachim Nagel said additional measures are needed to curb rising expectations of future prices and return inflation to the 2% goal.
“Our monthly surveys of firms and households are showing a significant increase in long-term inflation expectations,” Nagel said in an interview with the Zeitschrift für das gesamte Kreditwesen published on the Bundesbank website on Monday. “I firmly believe that we need to take further monetary policy action to halt and reverse this trend.”
The ECB raised interest rates by 250 basis-points last year and officials have said more hikes are to come. President Christine Lagarde said last week that allowing inflation to become entrenched “would be even worse.”
Nagel echoed that sentiment, saying it would be wrong to act too hesitantly now out of fear that higher borrowing costs could hurt economic growth.
“Then we would be forced to tighten policy all the more sharply further down the line, thus placing even more of a strain on the economy,” Nagel said.
Nagel also said:
- “I am optimistic that Germany will be able to avoid a severe economic slump and we will get off lightly with a mild downturn. And I am confident that we will be able to tame the high rate of inflation over the medium term”
- “There is a distinct risk of stronger second-round effects because the higher wage deals that are being reached could prolong the prevailing period of high inflation rates”
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.