The governor of Deutsche Bank calls on the European Central Bank to tighten monetary policy as inflation soars
The chief executive of Germany’s largest bank called on the central bank to tighten monetary policy in order to provide a “countermeasure” to cope with soaring inflation. He warned that inflation is producing risky side effects, which will last longer than policy makers expected.
Christian Sewing, CEO of Deutsche Bank, said: “The so-called panacea of ??the past few years-low interest rates and seemingly stable prices-has lost its effect, and now we are working hard to deal with the side effects. Monetary policy must offset this-and Sooner than later.”
At a meeting in Frankfurt on Monday, he added: “If the central bank fails to take countermeasures, the consequences of this ultra-loose monetary policy will become increasingly difficult to resolve.”
Sewing has long criticized the European Central Bank for using negative interest rates to stimulate the economy.
His comments reflect the aversion of many German banks to negative interest rates, which they believe has eroded their profit margins.They also emphasized people’s recent German inflation rate rises It reached a three-year high of 4.6% in October.
Sewing warned that according to data from the International Monetary Fund, global government, corporate and household debt increased by 27 trillion U.S. dollars to 226 trillion U.S. dollars last year. Potential trouble spots”.
The head of Deutsche Bank, one of Europe’s largest debt market service providers, said: “Many governments’ ultra-loose spending policies can only be achieved through the same generous monetary policy, which significantly intervenes in bond market pricing.”
He added: “But this in turn will bring considerable risks and side effects: global inflation is rising faster than any economist expected a year ago.”
Although many central banks around the world are tightening monetary policy by ending asset purchases and raising interest rates, the European Central Bank is expected to continue buying bonds for at least a year and insists that interest rate hikes are still far away.
European Central Bank President Christine Lagarde said on Monday that although rising inflation is a major concern among eurozone citizens, “the outlook for medium-term inflation remains sluggish”. In a speech to the European Parliament, she added that the conditions for the European Central Bank to raise interest rates “are extremely unlikely to be met next year.”
In contrast, Fed Vice Chairman Richard Clarida said last week that if the economy progresses as expected, the “necessary conditions” for US interest rates to rise from the current near-zero level will be met by the end of next year.
The Governor of the Bank of England, Andrew Bailey, also stated that if the economy develops in line with expectations, the Bank of England “will not suppress” potential interest rate hikes.