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New Bundesbank chief Joachim Nagel warned that high inflation could last longer than currently expected, telling the European Central Bank that it should be prepared to adjust monetary policy.
Inflation in the eurozone rose to 5% in December, the highest level since the European Statistics Office began monitoring the data, more than twice as high as the ECB’s target.
On the other hand, bank officials have repeatedly stressed that prices will not rise rapidly over time, noting the high energy costs and stressing that inflation should fall below the 2 percent target by the end of 2022. The new German governor warned in his inaugural speech today that such forecasts should not be relied on too much, as prices may continue to rise more strongly than currently expected.
“It is true that high inflation rates can be attributed, among other things, to successive factors that will disappear on their own. “But they are not the only cause.”
Medium-term forecasts are currently very unreliable and prices could rise even lower than estimated, he notes. “However, it seems to me that there is currently a risk that the inflation rate will remain higher in the long run than currently expected,” said the new head of the Bundesbank.
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