▷ 6.0 – Commentary on inflation by Mark Schrörs


29.11.2021 – 20:15

Stock exchanges newspaper

Frankfurt (ots)

And the next inflation shocker: German inflation jumped to a whopping 6.0 percent in November – measured against the HICP index calculated for EU purposes. In national terms, it is 5.2 percent – the highest level since 1992, i.e. for almost 30 years! Now panic is still out of place. But the time of appeasement and glossing over must be over for good. Inflation in Euroland is back – and the ECB must finally acknowledge that.

Sure, there is some evidence that the 6.0 percent will mark the peak of the recent surge. And there is even more evidence that inflation will fall significantly again in 2022. But prices are now increasing on a broader front, the pressure on the upstream levels remains high, and uncertainty about the outlook has increased. Above all, however, there are some risks of inflation, especially in the medium term. Liquidity glut, de-globalization and climate change are just a few of the key words. It has to be taken seriously.

But the current rise in inflation is already a huge problem, despite its supposed short-lived nature. For example, it severely diminishes real purchasing power and is therefore a heavy burden for the economic hopefuls consumer. It is by no means the case that only a hasty tightening of monetary policy can cause damage to an economy. Even with high inflation, there is a risk of considerable losses in growth.

It is therefore a good thing that there seems to be a rethinking in the Governing Council as well. Nonetheless, one cannot help but get the impression that at least some of the ECB grandees are still taking the problem too lightly. Of course, the ECB is also faced with a dilemma because the euro economy is weakening at the same time and the Omikron corona variant is now increasing the uncertainty about the economic outlook. So far, however, there is justified hope that Omikron, too, will at best delay the upturn a little, but not end it. In any case, a dilemma cannot be solved by focusing one-sidedly on only one problem.

The ECB must therefore make it much clearer that it is not only ready to loosen its policy further in the event that the economy drags on, but that it is also aware of the risk of inflation and, if necessary, tightening it. Only in this way can it maintain or regain trust as the guardian of price stability. The fact that the ECB trade union Ipso is now worried about compensation for the high inflation and is demanding more money is indicative – as a vote of no confidence in its own leadership.

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