European efforts to raise interest rates in the face of inflation (Getty)
paved head German central bank Joachim Nagel, today, Sunday, for the possibility of new “significant” increases in interest rates in… Euro-zone In a confrontation high inflationdespite the growing risks of a recession.
“The move by the European Central Bank, on Thursday, to raise the key interest rate by 0.75 percentage points was an important signal,” Nagel said, warning that “if the inflationary situation remains unchanged, other important steps will have to be taken.”
“We have indications that inflation is spreading in many areas” of the economy, he added.
He believed that the inflation rate in Germany could reach the level of “over 10%” within one year in December, the period that he believes will witness the peak of the current inflationary rise.
The Bundesbank is talking so far about 10% in the last months of the year, and therefore Nagel mentioned expectations of a worse situation, but he said that “inflation is supposed to slow in 2023, but it will remain above 6% next year, which is a very high level.” .
Bundesbank President Nagel considers further significant interest rate hikes #ECB for necessary. @bundesbankhttps://t.co/LE0Lse3bRk
— The News (@DLFNews) September 11, 2022
In these circumstances, a continued tightening of the cost of credit in the Eurozone seems inevitable, said the Bundesbank President, despite the negative impact of this policy on growth.
Nagel said that it is “possible” that Germany, Europe’s largest economy, will slip into recession in the third and fourth quarters of this year, and remain so until the beginning of next year, noting that there are “a number of elements that tilt towards this scenario.”
Eurozone inflation stood at 9.7% in August, and with continued pressure on energy prices, it is expected to reach double digits in the coming months.
The European Central Bank, whose main task is to ensure price stability, seeks to achieve an inflation rate of 2%, and after facing record and persistent inflation, it decided, on Thursday, to raise interest rates at an unprecedented rate, and its President Christine Lagarde warned that further increases would follow.
The Monetary Authority’s Board of Governors decided to raise key interest rates by 75 basis points for the first time since it was established two decades ago, with the exception of a technical correction in 1999.
The European Central significantly raised its forecast for inflation in 2022 to 8.1%, and it is expected to reach 5.5% in 2023 and 2.3% in 2024.
(AFP, The New Arab)