If inflation does not decrease by March, the head of Germany’s Federal Bank, Joachim Nagel said he would insist the European Central Bank (ECB) take action. His announcement comes after experts predicted the continuation of high inflation rates.
“If the situation does not change by March, I will push to bring monetary policy back to normal”, Nagel told German weekly Die Zeit on Wednesday. “The way I see it, the economic costs are much higher if we act too late than if we act early”, he added.
Nagel’s comments came after Federal Bank experts concluded that inflation rates would stay “significantly above 4%” on average throughout the year. Nagel called on the ECB to raise interest rates and halt government and private bonds purchases.
So far, ECB officials have stuck to their policy of low-interest rates and bond-buying even in the face of recent significant price increases.
Later that day, Isabel Schnabel, the German member of the ECB’s executive board, defended the bank’s approach. “We take people’s concerns about rising prices very seriously”, she said on Twitter, promising that the ECB would use “all our instruments” to stabilise inflation “in the medium term”.
Talking to EU lawmakers on Monday, ECB chief Christine Lagarde had also rejected the criticism, arguing that, despite recent spikes, inflation rates would be at 2% in the medium term.
Germany’s Federal Bank has been known for opposing ECB policies and demanding strict control of inflation. With these comments, Nagel, who took office last month, follows in the footsteps of his predecessor, Jens Weidmann, who was known for his disputes with bankers at the ECB.
(Julia Dahm | EURACTIV.de)