Bundesbank Chief Joachim Nagel recommended that the European Central Bank continue increasing its interest rates so as to repel the recession that Germany seems likely to face otherwise. Nagel stressed the importance of acting quickly in order to tackle the high inflation, explaining, “the past few months have shown that we have to decide on monetary policy from meeting to meeting.”
Nagel added that in order to combat the inflation issue, it will be key to keep medium-term inflation expectations “stable at 2%”. The European Central Bank previously raised rates by 50 points, before indicating that more hikes would likely follow. Currently, inflation appears to be hovering below 9%; four times the bank’s target. The value of the euro also appears to be wavering as of late, leading many forecasters to adjust their expectations for the impending hikes.
Germany’s gas supply also appears to be at risk as Russian imports, which are still heavily relied upon, remain low. Currently, the Rhine River, which is a vital waterway for transporting fuel and other industrial goods to Germany, is experiencing low water levels, making it difficult to navigate. With such issues along with the ongoing energy crisis in mind, Nagel believes that Germany will likely face a recession next winter.