Bankers crave higher interest rates

Status: 19.11.2021 3:25 p.m.

After the corona crisis, to new strength. This year’s bank meeting in Frankfurt was under this motto. But the return to normal is also more difficult than expected in the financial world.

Whether petrol, gas or vegetables: Consumers in the euro zone have to dig deeper and deeper into their pockets. In Germany alone, the inflation rate was last at 4.5 percent and thus at its highest level for almost thirty years. This is causing heated discussions – also in the European Central Bank. “Inflation is undesirable and painful, and there are of course concerns about how long it will last. We take these concerns very seriously and are closely monitoring developments,” said ECB boss Christine Lagarde at the European Banking Congress in Frankfurt am Main today.

“We have to be persistent”

According to Lagarde, what is becoming more expensive in particular are energy products such as gasoline, heating oil and the crude oil required for them. In addition, she sees delivery bottlenecks in many areas: This also drives up the prices for many goods – especially when the normal VAT of 19 percent is due again in this country, while it has been lower in the meantime. But for the ECB boss, a lot of it is related to the corona crisis – and is only temporary. Inflation is expected to fall again as early as next year.

However, Lagarde does not want to know anything about a turnaround in interest rates, as is being demanded in Germany in particular. “We have to persist in our monetary policy. In particular, given temporary inflation shocks, we must not allow ourselves to be tempted to tighten our monetary policy prematurely,” said the central banker. Therefore, beyond the acute Corona crisis, the ECB will continue to pump billions into the economy and leave interest rates unchanged.

More and more experts are warning

In contrast, the representatives of large banks are ringing the alarm bells. They no longer believe in the ECB’s narrative that prices only rose temporarily above the rate of two percent targeted by the central bank. Christian Sewing, head of Deutsche Bank, is one of the warning people. “The delta variant of the virus is rampant worldwide, which will continue to disrupt global supply chains, and this problem will keep us busy well beyond this winter,” he predicts.

Many building materials are already in short supply, but so are important components such as computer chips. That drives up the prices of goods – in Europe and even more so in the US. The US Federal Reserve has now reacted to this and initiated the turnaround in monetary policy. “We are experiencing a normalization of monetary policy in the US, the Fed is throttling its bond purchases and communicating this so carefully that it protects the stock markets from turbulence,” says Jean Lemierre, the former President of the European Bank for Reconstruction. “The markets also expect such important decisions for Europe, at the latest at the next interest rate meeting of the Governing Council.” It’s coming together next month. The pressure on the European monetary authorities to soon follow the example from the USA is likely to increase.

Discussion about rising inflation at the European Banking Congress

Ursula Mayer, HR, November 19, 2021 2:21 p.m.

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