Bundesbank President Hints At Inflation Problem

Bundesbank President Hints At Inflation Problem by Andrew Blumer last updated on October 08, 2023

Bundesbank President Belives Inflation Still Remains A Problem

In the Eurozone area, the inflation continues to fall month after month, but it seems that's not enough to convince Joachim Angel (Bundesbank chief). According to him, price growth in the EU area remains high, which indicates that the fight against inflation is still not won.

In the European Union, the deposit rate is now sitting at 4%, which is a record-high level. Considering it was in the negative territory last year, that's a major jump!

EU Inflation To Reach 2% In 2025

Now that the ECB has paused under the assumption that inflation is brought under control, it appears that some believe that's not true. So, if we take Nagel's word for truth, it may signal more rate hikes by the ECB during 2024.

In his speech, Nagel used the word 'greedy beast' for inflation and said that. the fall in inflation is still not enough. He added that the core rate is still very high, which is worrisome for the EU countries.

In September 2023, the EU inflation went lower and refreshed the hopes that the 3% target would be achieved by the year-end. In the year 2024, inflation will flatline, which means no major increase or decrease will take place.

According to the ECB president, the 2% target of inflation will be achieved in the next 2 years (2025). So, based on that forecast, it appears that the high-interest rates will also stay for the next 2 years as well.

So, those who were hoping that the ECB would move away from its restrictive policy on the fall of inflation may have to reconsider.

Looking ahead, the economic growth in the EU is flatlined with little chance of more interest rate hikes from the central bank. According to the Bundesbank President, a rate hike by the ECB will be of a small scale and will take place in June/July 2024.

He also stressed the ECB officials to work on the fiscal capacity of a 'centralized nature' that will be applicable to the Eurozone area.