According to Bundesbank President Joachim Nagel, the fight against inflation in the euro area has not yet been won. “Inflation is now falling again, but the “greedy beast” has not yet been defeated,” said Nagel, according to the text of the speech on Thursday in Karlsruhe. What is worrying is the continued very high core rate, which excludes the volatile energy and food prices. “It provides an insightful picture of the underlying inflation trend, and it clearly hasn’t broken yet.”

Nagel emphasized that the Council of the European Central Bank (ECB), of which he is a member as Bundesbank President, must continue the restrictive course “until it is ensured that inflation returns to our medium-term target of 2 percent.” Inflation in the Eurozone had recently weakened. According to the Eurostat statistics office, the annual inflation rate fell to 4.3 percent in September after 5.2 percent in August.

The euro is proving to be a stable currency

The ECB Council has so far raised interest rates in the euro area ten times in a row in the fight against high inflation. The key interest rate at which banks can obtain fresh money from the central bank is now 4.5 percent. The deposit interest rate that banks receive for parked funds has reached 4.0 percent, the highest level since the monetary union was founded in 1999. Most observers expect that key interest rates will initially remain at this level.

Higher interest rates make loans more expensive, which can slow down demand and counteract high inflation rates. However, more expensive loans are also a burden for the already weak economy.

According to Nagel, the balance sheet of European monetary policy over the past 25 years is impressive: “On average over the entire period, the inflation rate in the euro area is 2.1 percent. In the long term, the euro has proven to be a stable currency, as promised .”

ECB decisions September 14, 2023 Introductory statement Lagarde September 14, 2023 Time series ECB key interest rates ECB purchase programs ECB explanations on inflation ECB definition of price stability Federal Statistical Office on inflation in Germany Eurostat on inflation in the euro area Communication from the EU Commission on the economic forecast September 11, 2023 Economic forecasts of the EU Commission EU forecast for Germany