"It remains to be seen how sustainable this decline is and whether it may only be temporary," says Wieland. Energy prices played a key role in the decline. "If you exclude energy prices, the increase in consumer prices in January was still 3.8 percent." Wieland also points out that the inflation of all domestically produced products and services, as measured by the GDP deflator, was still over 5% in the third quarter of 2023.
In comparison to the situation after the oil price shock in the 1970s, Wieland points to the role of wage development. At that time, the first dip in inflation was followed by a rise to a second high - "not least because of the subsequent wage increases". Currently, the sustainable components of inflation have not yet fallen that much. "This suggests that we should wait and see how things develop." According to Wieland, the right time for an interest rate cut could well come in the summer. However, missing this point in time is currently the lesser problem.
In retrospect, the European Central Bank (ECB) reacted too late to the rise in inflation, according to Wieland. In the summer of 2022, it was then rightly forced to raise interest rates quickly. It was also right to raise interest rates further in spring and summer 2023. That was when the ECB regained confidence. "It would have made even more sense."
However, Wieland does not believe the ECB is alone in its delayed reaction. "Both the ECB and the US Federal Reserve could and should have reacted earlier to the rise in inflation following the coronavirus crisis." Central banks in emerging markets would have reacted earlier, according to Wieland.
Frankfurter Allgemeine Zeitung: "Kann man dem Rückgang der Inflation trauen?"