2023-06-27 13:07:45
The Deutsche Bank boss compares the approach to inflation with curing a fever. He recommends continuing the measures – even if this could have negative consequences in the future.
Deutsche Bank boss Christian Sewing sees the central banks still challenged in the fight against high inflation. “It would be a serious mistake to slack off in any way now,” said Sewing, who is also President of the Association of German Banks (BdB), the news portal “The Pioneer”.
“It’s the same as if you had a fever of 40 and the fever went down to 38.5 or 39 and you stop taking your medicine. Then you have a setback.” That shouldn’t happen.
role of the ECB
The European Central Bank (ECB) has raised interest rates in the euro area eight times in a row since July 2022. The key interest rate at which commercial banks can get fresh money from the ECB is now 4.0 percent. Higher interest rates make loans more expensive. This can slow down demand and counteract high inflation rates.
For the July meeting, ECB President Christine Lagarde has already announced another step up: “It is very likely that we will raise interest rates again in July.”
He has no doubt that the ECB and the US Federal Reserve will do everything they can to curb inflation, Sewing said. The ECB is aiming for price stability in the euro area in the medium term with an inflation rate of two percent.
“This also means that the central banks are rightly accepting that we might get a recession,” Sewing said in the published interview. Higher lending rates can lead to investments being postponed and thus economic growth being weaker.
“From the economic development (…) we will get into a situation that the second half of the year and maybe the first quarter of 2024 will be more difficult. But it is right to get inflation out of the system, to really sweat it out ‘ Sewing said. An economy like Germany can withstand that.
Lagarde: Prospects point to further ECB rate hikes
In the fight against inflation, the European Central Bank is heading for the next rate hike. “Our task is (…) not yet complete. Unless the outlook changes significantly, we will raise key interest rates again in July,” said ECB President Christine Lagarde at a central bank conference in Sintra, Portugal. It is “unlikely that any central bank will be able to declare with absolute confidence in the near future that interest rates have peaked.” (dpa)
#Deutsche #Bank #boss #fight #inflation #won #free #press