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Inflation and SPD party book: Here the head of the Bundesbank chats inside the box

Inflation and SPD party book: Here the head of the Bundesbank chats inside the box
Written by insideindyhomes

DAccording to Bundesbank President Joachim Nagel, the period of extremely low interest rates in the European Monetary Union will soon come to an end. “There are already many voices – I’m one of them – who would then say that the first rate hike could be made in July,” he said during a discussion with young citizens. Given the current data, there is at least some evidence for a possible tightening, he added. Nagel recently signaled that negative interest rates in the euro area should be history “relatively soon”.

The deposit rate set by the European Central Bank is currently minus 0.5 percent. That means banks have to pay interest if they hoard excess funds in central bank accounts. The prime rate is currently zero percent. The next interest rate meetings of the ECB are scheduled for June 9th and July 21st.

Federal Finance Minister Christian Lindner said in an interview with the “Spiegel” that he welcomed the fact that the ECB would soon be taking interest rate steps. However, the drivers of inflation are the energy prices and the disrupted supply chains, less the central bank policy: “But the responsibility lies primarily with the state,” emphasized the FDP leader. The Bundestag has just passed the 2022 tax relief law, one of the reactions of the traffic light coalition to the sharp rise in energy prices.

“Sometimes you pinch yourself”

The ECB is under pressure because the inflation rate of 7.5 percent has shot far above the central bankers’ target – they are aiming for an inflation rate of around 2 percent in the medium term. The Bundesbank also sees urgency as it now expects a high rate of inflation of almost seven percent for this year in Germany.

Nagel also emphasized that the Bundesbank had repeatedly pointed out that there could be “an imbalance” on the real estate market in Germany and that there were signs of overheating: “I think the interest rate trend will also contribute to the fact that maybe in one or the other The price development is no longer as it was observed in the last ten years. I think that also helps a lot here to curb overheating tendencies.”

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