Rates like in the 70s
Deutsche Bank Vice: Double-digit inflation possible
4/16/2022 1:36 p.m
The German economy is also groaning under high inflation. But the end of the road might not have been reached, my banker von Rohr. He thinks inflation of ten percent this year is possible. This has implications for consumers, but also for banks.
The Vice CEO of Deutsche Bank, Karl von Rohr, believes double-digit inflation rates are possible in the current year. “Our forecast is that we will be at an inflation rate of seven to eight percent over the course of the year,” he told the “Frankfurter Allgemeine Sunday newspaper”. In the event that energy imports would be more limited, “we could even see ten percent and more”.
“We have to be prepared for the possibility of inflation rates we haven’t seen since the 1970s,” von Rohr continued. In this situation, he considers the European Central Bank (ECB) to raise interest rates in the near future as “urgently necessary so that inflation expectations do not solidify at a high level”. His impression is that the ECB “now also sees that interest rate hikes are inevitable,” said the Deutsche Bank manager.
Penalty interest rates for banks remain
The ECB decided on Thursday to keep the key interest rate at zero percent despite persistently high inflation rates. Banks also have to continue to pay penalty interest if they deposit excess money with the central bank. This so-called deposit rate remains at minus 0.5 percent. However, the ECB did not rule out subsequent rate hikes.
As soon as the ECB waives negative interest rates, “there will no longer be any reason for us to levy custody fees in retail customer business,” announced von Rohr. “That should be pretty quick then.” Further interest rate hikes by the central bank will probably not be passed on to customers immediately, but will first analyze the market.