The head of a central bank in Germany has called on central banks to tighten monetary policy to provide “solutions” to rising inflation, which he warned would be risky and would last longer than policymakers expected.
Deutsche Bank CEO, Christian Sewing, states: “The low interest rate interest rate has diminished, and we are now struggling with the consequences. The financial plan needs to address this – and soon. ”
Speaking at a conference in Frankfurt on Monday, he added: “The consequences of a severely disrupted financial system will be much more difficult to fix if central banks fail to take action.”
The sting is a long-standing criticism that the European Central Bank is using bad interest rates to boost the economy.
His comments show the disgust of many German banks for the wrong interest rate, which they say has undermined their profits. He also emphasizes the growing concern rising inflation in Germany up to thirteen years above 4.6 percent in October.
The rise of $ 27tn in global government, corporate and domestic debt to $ 226tn last year, according to IMF figures, “was unstable over time and the potential crisis in global financial markets”, Sewing warned.
The executive director of Deutsche Bank, one of Europe’s largest credit providers in the credit markets, stated: “Most governments are simply losing money because of the monetary policy that is so entrenched in the stock market.”
He added: “And this also has its risks and consequences: inflation is growing worldwide more than any economist could expect last year.”
While many central banks around the world are tightening monetary policy in curbing inflation and raising interest rates, the ECB is expected to continue buying bonds for one year and has confirmed that inflation is still a long way off.
Christine Lagarde, president of the ECB, said Monday that while inflation was important for eurozone citizens, “the form of inflation in the medium term is still low”. He further added in a speech to the European Parliament that the conditions for the ECB to raise prices are “extremely unlikely to be met next year”.
In contrast, US Federal Reserve deputy chairman Richard Clarida last week said “conditions necessary” for US interest rates to rise from near zero level would be met by the end of next year when the economy recovers as expected.
Bank of England Governor Andrew Bailey also said the BoE would not “put a stop to it” when it comes to inflation, as the economy grows in line with predictions.