03.02.2022 – 14:11
BVR Federal Association of German Volksbanken and Raiffeisenbanken
With today’s confirmation of monetary policy, the European Central Bank (ECB) missed the opportunity to change course. In the opinion of the Federal Association of German Volksbanken and Raiffeisenbanken (BVR), the ECB should have made preparations for an interest rate turnaround at today’s council meeting due to the threat of high inflation. BVR board member Dr. Andreas Martin: “The ECB is running behind the times and is hesitating with the necessary preparations for an interest rate turnaround. A clear signal from the ECB would show the financial markets, but also the collective bargaining parties, that monetary policy will act in good time if high inflation should persist. ”
If inflation does not subside significantly over the course of the year, the ECB will have to prepare for an initial interest rate hike later this year. The Governing Council expects net purchases to end before it starts raising key ECB interest rates. Therefore, the ECB must completely stop buying bonds by autumn. So far, the ECB has decided to end the pandemic-related PEPP bond purchase program at the end of the first quarter of 2022, but has initially increased the further APP purchase program and announced that it will continue until at least October of this year. Martin: “At its upcoming meeting in March, the Governing Council of the ECB should make lower net purchases under the APP than previously planned and decide to end the program in the fall.”
According to the Harmonized Index of Consumer Prices (HICP), consumer price inflation in the euro area was 5.0 percent in December 2021, well above the medium-term monetary policy target of 2 percent. Inflation is currently being driven by higher energy prices. However, the inflation rate adjusted for energy prices, at 2.8 percent, is well above the 2 percent mark. This suggests that the price hike is broad-based and may therefore last longer. According to the official consumer price index (CPI), an inflation rate of probably 4.9 percent was reported for Germany in January.
Original content from: BVR Federal Association of German Volksbanken and Raiffeisenbanken, transmitted by news aktuell