Joachim Nagel, the head of Germany’s central bank, says euro zone interest rate setters need to be “stubborn” and continue to raise borrowing costs to fight inflation, easing fears that recent financial turmoil could also hurt more European banks, writes FT, quoted by ZF.
“Our fight against inflation is not over,” Joachim Nagel told the Financial Times after he and other members of the European Central Bank’s board of governors maintained plans to raise interest rates by half a percentage point last week.
“There is certainly no doubt that price pressures are strong and broad-based throughout the economy,” the Bundesbank president said. “If we want to tame this stubborn inflation, we will have to be even more stubborn.”
Interest rate setters at the Federal Reserve are set to decide today whether to continue raising interest rates despite the collapse of US lenders Silicon Valley Bank and Signature. Analysts widely expect the Fed to raise US borrowing costs by a quarter point.
Following the bailout of Credit Suisse on Sunday, Nagel said banks may become “more cautious” in lending as a result of market sentiment. However, he added that it was too early to conclude that the region was heading for a credit crunch that would stifle demand.
Nagel, who became president of the Bundesbank at the beginning of last year, played down the risk of contagion for the euro zone’s “resilient” banking system. “We are not facing a repeat of the financial crisis we witnessed in 2008,” he said. “We can handle this situation.”
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