Home Business Nagel and De Galhau (ECB) determined to bring inflation back to 2%. Here are their predictions

Nagel and De Galhau (ECB) determined to bring inflation back to 2%. Here are their predictions

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Nagel and De Galhau (ECB) determined to bring inflation back to 2%.  Here are their predictions

Two of the most important officials of the BCE they said they were determined to bring inflation to the eurozone to the 2% target.
Speaking in a joint TV interview on the German channel Phoenixthe president of the Bundesbank, Joachim Nagel and the governor of the Bank of France, Francois Villeroy de Galhau they declared that the Frankfurt institute’s monetary policy tightening will manage to tame the price race in Euroland, currently at levels five times higher than the ECB’s 2% target.

“We will bring inflation back to 2% by the end of 2024 or 2025,” Villeroy said. “This is not just a forecast, a projection. It’s a commitment.”

Since its July meeting, the ECB has raised key interest rates by 200 basis points and there are less than two weeks left until the next and last meeting for the year, on the agenda December 15th.

Expectations are for another rate hike of at least 50 basis points, and the board should agree ways to reduce its balance sheet by at least 5,000 billion euros of bonds.

ECB board undecided between 75bps hike and 50bps hike in December

Several officials said they were still undecided whether to hike rates by 75 basis points for a third consecutive time or make a more moderate 50bp hike.
Nagel said the decision will be guided by the latest data.

“We will have new macroeconomic projections for 2023-2024 and for the first time also for 2025. This will be the basis for our decision,” Nagel said. “It is clear that rate hikes must continue.”

When asked how long loan costs will increase, Villeroy replied “for as long as necessarywithout specifying a concrete timing.
Meanwhile, governments have used hundreds of billions of euros to shield businesses and households from rising energy costs, which central bankers say could undermine their efforts to stave off inflation. Nagel and Villeroy called on governments to return soon to more balanced and less expansionary budgets.

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A special situation is a special situation, but at some point it’s over”Nagel said. “The signal from fiscal policy must clearly be a return to the debt brake” and adherence to European tax rules”concluded the governor of the Bundesbank.

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