Mr. Nagel, the European Central Bank has now raised interest rates by only 0.25 percent instead of 0.5 percent. Can you already be satisfied with the fight against inflation?
Gerald Braunberger
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Christian Siedenbiedel
Editor in business.
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The battle against high inflation has not yet been won. I could also have imagined an interest rate hike of 0.5 percentage points. But we have already announced further interest rate hikes. And we have also taken a decision that has been particularly important to me for a long time: the central bank's balance sheet will be reduced more sharply than before from July onwards. All in all, the decision was okay from my point of view.
But you're not done in the fight against inflation yet?
Definitely not. Although the inflation rate has declined in recent months, it still remains far too high. And when it comes to the core inflation rate – that is, inflation without the strongly fluctuating prices for energy and food – you don't really see much movement. We cannot be satisfied with that.
So why doesn't the ECB stick to larger interest rate hikes of 0.5 percentage points?
The important thing is that we don't take a break. People are now sensing that monetary policy is dampening the economy. And it has to if it is to break inflation. But now the step size is no longer as central as it was last year, when monetary policy was still loose overall.
Interest rates in the euro area have risen very rapidly. Many critics of the ECB did not expect this. Some said you can't even raise interest rates...
This is often a bit neglected in the comments. We started in July last year and have now managed seven rate hikes – 375 basis points in total. The Governing Council of the ECB has never raised key interest rates so vigorously. But inflation is also extremely high. And we're not done yet: interest rates should rise even further.
The fear that the spreads on the government bonds of certain euro countries would get out of hand did not come true, did they?
It is crucial that Member States offer the prospect of sound public finances. This ensures lower yields and spreads on government bonds. If yields were to get out of hand unjustifiably and seriously jeopardise the effect of our monetary policy, we could also intervene. To this end, we adopted the Transmission Protection Instrument TPI last July.
The best instrument is one that you never have to use? Like the announcement by then-ECB President Mario Draghi that he would save the euro, "whatever it takes"?
Apparently, the market has understood our determination to act under the conditions of the TPI if necessary.
In principle, would it be possible to derive an optimal interest rate path from economic models in such a situation as is currently the case?
Of course, there are models on the basis of which one can determine optimal monetary policy. At the Bundesbank, we calculate such interest rate paths. And the financial markets also have their interest rate expectations, for example for the so-called terminal rate – i.e. the interest rate level at which we could stop our hikes. Following the current ECB decision, these market expectations are ten basis points lower than before. But let me make it clear: the market is not always right. He has been rather overly optimistic about inflation in recent months.