Bundesbank President Joachim Nagel warned in an interview, “our monthly surveys of firms and households are showing a significant increase in long-term inflation expectations.”
“I firmly believe that we need to take further monetary policy action to halt and reverse this trend,” he added.
Nagel also said that allowing inflation to become entrenched would be even worse. “Then we would be forced to tighten policy all the more sharply further down the line, thus placing even more of a strain on the economy.”
“I am optimistic that Germany will be able to avoid a severe economic slump and we will get off lightly with a mild downturn. And I am confident that we will be able to tame the high rate of inflation over the medium term”, he noted.
“There is a distinct risk of stronger second-round effects because the higher wage deals that are being reached could prolong the prevailing period of high inflation rates”
