In the “Krone” interview, the Austrian head of the central bank pleads for clear steps from the European Central Bank, which is also understood by the population.
He is considered a reserved currency expert, but this time the governor of the National Bank, Robert Holzmann, chooses for clear words in an interview with the deputy editor of “Krone”, Georg Wailand. He calls on the ECB to raise interest rates more sharply in the summer to curb runaway inflation. As is known, the European Central Bank (ECB) plans to raise interest rates by 0.25 percent on July 21 at the next meeting of the monetary policy council.
The Austrian currency watchdog thinks that is not enough: “Inflation here has recently risen to 8.7 percent, the price increase has intensified, so clear signals are needed that the population understands.”
Because the ECB’s goal is actually to allow only two percent inflation in the eurozone, which is currently miles away. Holzmann’s move is also supported by the central banks in the Baltic States, who want the ECB to raise interest rates by 0.5 percent. Holzmann even goes a step further: “If the situation does not improve, a 0.75 percent rate hike may be necessary.” This is an entirely new announcement after the ECB’s zero-interest policy for years. However, inflation has risen much faster than expected, and those who wait too long may cause inflation to continue to solidify and remain at high levels. That is why, according to Holzmann, it would be better to raise interest rates noticeably now to bring the economy into calm waters.
In the shadow of this development, the interest rates that individual countries have to pay for their sovereign debt have diverged widely: the rise in Italian bonds in particular has made markets uneasy. These countries should solve their structural problems, cheap money would only tempt them to spend more.
How long will it take for inflation to fall back to 2 percent? Holzmann: “That depends on the adoption of the measures, it will probably take until next year and the year after that.” Given the high inflation, are there no worries about a wage-price spiral that will push inflation up further? Holzmann: “As long as wage rounds are negotiated after inflation in the past, I don’t see that.”
But inflation makes savers even poorer? Holzmann: “Real interest rates will remain negative for people, so it’s important to get interest rates right here.” such deposits charged 0.5 percent? Holzmann: “The sharp rise in interest rates is putting an end to that, and I think that’s a positive factor.” People were taught from childhood that saving pays good interest – and suddenly it was the other way around? A step back to normalcy is very welcome.
What many are currently wondering: Will there be an economic recession after Covid and the war in Ukraine? Holzmann: “If all programs start in Europe and there is no gas stop, we can avoid a recession. However, should gas supplies come to a halt, a recession in Austria and Germany would be inevitable and unemployment in certain industries would rise sharply, which would vary greatly from region to region.”
Source: Krone
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
