Bundesbank chief Joachim Nagel said yesterday that, “monetary policy must react decisively in order to preserve the credibility of the inflation target. Data from a number of countries shows that frontloading or bringing interest rate increases forward, reduces the risk of a painful economic downturn.”
“In my view, a larger interest rate hike reduces the risk of inflation expectations becoming de-anchored,” Nagel said. “We should not delay further rate hikes for fear of a possible recession. Inflation rates will not return to the central bank’s inflation target on their own.”
However, Governing Council member Yannis Stournaras said yesterday that there is “no need to take very large steps” on rate hike. “Gradual normalization will be appropriate.”
“In my view, this year, we will see the peak of inflation and a steady deceleration thereafter, inflation will gradually decline in 2023 and converge towards the target in 2024,” he added.
