Economists Call for Interest Rate Hike Due to Inflation
Economists expect an average inflation rate of 4.4 percent for Germany in the current year. This is a finding from the ifo and FAZ Economists Panel, a joint quarterly survey. For the coming year, they expect inflation to be 3.4 percent. Since the European Central Bank’s inflation target is close to 2 percent, the ECB should start fighting inflation immediately, say 75 percent of survey participants; 69 percent consider an interest rate hike to be the most appropriate measure. “Russia’s war against Ukraine has added another driver to already high inflation,” says ifo researcher Niklas Potrafke. “The ECB should now finally raise interest rates to help contain inflation.”
When asked how high the ECB’s key interest rate should be at the end of 2022, participants in the ifo and FAZ Economists Panel give an average of 1 percent. Around 40 percent of participants do not want to reopen the targeted longer-term refinancing operations (TLTROs), and a similar proportion would like to reduce or stop quantitative easing altogether.
Participants most commonly cite rising energy and commodity prices as the cause of inflation. Responses received since February 24 also mentioned Russia’s attack on Ukraine. The participating economists also mentioned supply bottlenecks and pandemic-related effects (catch-up effects in consumption with simultaneous supply shortages). They also see the ECB’s lax monetary policy as a cause of consumer price increases. The survey was completed by 145 economics professors.
Survey
Higher Inflation Rate for Germany in the Longer Term
The inflation rates in Germany and the euro area, which are currently well above the inflation target set by the European Central Bank (ECB), are dominating the current monetary policy debate. There are increasing signs that the higher inflation will last longer than originally expected by most economists and members of the central banks.
