European officials have been debating for several years the need to be more self-sufficient and less dependent on other parts of the world, but the talks intensified following the Covid-19 pandemic and then again after the invasion of Europe. Ukraine by Russia.
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Joachim Nagel, president of Germany’s Bundesbank and one of the ECB’s most hawkish members, told CNBC’s Annette Weisbach on Wednesday that consumer price inflation is likely to remain stubbornly high.
“It looks like for at least the next two months inflation will remain at very high levels, maybe expect for the second half of the year inflation to come down to some extent,” he said. he said Wednesday.
“But still, what we expect for this year for Germany is an average inflation rate of around 6-7%.”
Markets have been mulling the prospect of higher interest rates in the euro zone for longer, after data released this week showed higher-than-expected inflation figures in France and Spain.
European bond yields rose on Tuesday, then again on Wednesday on the back of the latest data. The yield on the German 10-year Bund – considered the region’s main benchmark – hit its highest level since 2011 on Wednesday.
Goldman Sachs said on Wednesday it was raising its expectations for maximum interest rate hikes in the euro zone. The investment bank is now forecasting another 50 basis point hike in May, rather than just 25 basis points at the time.
Speaking to CNBC, Nagel also said “the journey is not over” and the central bank “will have to do more” to reduce the balance sheet.
The ECB begins this month to sell bonds at a rate of 15 billion euros per month until June. The reduction in the balance sheet is also a measure to bring down inflation in the bloc.
Eurostat, the region’s statistics office, released new inflation figures on Thursday.