Inflation accelerant (Handelsblatt)

In view of war and crises, the European Central Bank (ECB) should fight inflation more decisively, demands Prof. Volker Wieland in a guest commentary in the financial newspaper "Handelsblatt".

In his article, Wieland draws parallels between the current global situation and the stagflation of the 1970s: "Then, as now, war and the energy crisis accelerated inflation, which, of course, had already started earlier.

According to Wieland, the decisive factor at present is the monetary policy of the U.S. Federal Reserve. It has raised the key interest rate, the federal funds rate, by 2.25 percentage points since mid-March to between 2.25 and 2.5 percent. An increase of another 75 basis points is likely to follow in September, Wieland said.

In the 1970s, then-Fed Chairman Arthur F. Burns suggested it was a "transitory period" of cost-pressure inflation. Restrictive monetary and fiscal policies to fight inflation should be refrained from, he said. "One is tempted to warn the ECB to please not give the Burns of our time," Wieland warns.

Moreover, he advises the government, instead of always putting together new relief packages, to let the high energy prices take effect, thereby exploiting high savings potentials - "and thus become independent of the Russian warmonger Putin" as quickly as possible.

Handelsblatt: "Brandbeschleuniger der Inflation"