The European Central Bank must continue to raise interest rates to battle inflation, according to the head of Germany’s central bank, who also highlighted the risk of recession.
In an interview with the Rheinische Post published on Saturday, Bundesbank President Joachim Nagel warned that high inflation will continue to cause headaches later this year and next year, with the prospect that inflation rates could hit 10 percent this fall and that they will average above 6 percent in 2023.
“With the high inflation rates, further interest rate hikes must follow,” said Nagel, who is also a member of the ECB’s Governing Council.
The ECB raised interest rates in July for the first time in over a decade, by 50 basis points, and could increase them again in September.
Nagel also acknowledged that a recession seems likely later this year due to the energy crisis and ongoing supply-chain problems. “If further delivery problems are added, for example due to prolonged low water levels, the economic prospects for the second half of the year would deteriorate further,” he said.
