Woman Refuelling a Car

The European Central Bank (ECB) must remain “stubborn” and continue to raise its interest rates to bring inflation to heel, Joachim Nagel, president of Germany’s Bundesbank and Europe’s chief rate hawk, said in a public statement after the bank bumped its rate by a half-point on 16 March.

Nagel’s Bundesbank is Germany’s central bank and the ECB’s largest shareholder.

“Price pressures are strong and broad-based across the [Eurozone] economy,” he said. “If we are to tame this stubborn inflation, we have to be even more stubborn.”

Inflation was pegged at 8.5 percent in February, more than four times the ECB’s 2-percent target. The Bundesbank forecasts 6.6-percent average inflation in Germany through this year.

Inflation must fall “significantly and sustainably” before the bank can consider pausing its campaign of rate increases, Nagel stressed, and core inflation—which screens out energy and food costs—must fall from its 5.6-percent record pace set last month.

“There is still some ways to go, but we are approaching restrictive territory,” Nagel said of the ECB’s latest rate increase.

If the central bank stops raising its rate, it must hold firm at that point and not begin to cut the rate because “that would cause inflation to flare up again,” he warned.

Banks could become more cautious in their lending following the messy collapse of Credit Suisse on 18 March, Nagel acknowledged, which could have an effect similar to a rate hike.

However, it remains too soon to know how Credit Suisse’s failure will affect the rest of Europe’s banking industry and wider economy, he pointed out.

He brushed off concerns that Credit Suisse’s tumble will shake the region’s other banks.

“We are not facing a repeat of the financial crisis we saw in 2008,” he said. “We can manage this.”

TREND FORECAST: Like the U.S. Federal Reserve, the ECB waited a year too long to raise rates. Christine Lagarde, the former head of the International Monetary Fund (aka International Mafia Association) and now the leader of the European Central Bank bullshitted for two years that inflation was not rising and the ECB could keep interest rates in negative territory and keep buying up corporate and government bonds. 

An outright scam, as with the United States and other nations, so these Banksters could give a reason to keep pumping cheap money into equities to artificially prop up economies decimated by politicians that locked down economies to fight the COVID War. 

Back in November 2021, while we had long forecast surging inflation, Lagarde said she didn’t see it coming and it would be “wrong” to raise interest rates now because inflation will begin to cool by the time the new rates would have a chance to impact the economy. 

On 3 December 2021, she told the Financial Times that inflation was peaking and that the inflation profile looked “like a hump…and a hump eventually declines.” She said at the time that the ECB is “very unlikely” to alter its interest rate—which has remained negative for seven years—in 2022. Now, as the central bank is scrambling to catch up with inflation, the Eurozone will sink deeper into Dragflation, our Top Trend 2022 defined by rising prices and shrinking economic productivity. 

Indeed, with EU inflation at 8.5 percent and interest rates going up to only 3 percent and a bit higher, real interest rates are deep in negative territory.

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