What matters now in the fight against inflation (Münchner Merkur)

In the fight against inflation, the European Central Bank (ECB) has long been criticized for its hesitant stance. Now it has finally reacted. But things are not getting any easier for the central bank in view of the threat of recession. Volker Wieland explains in a guest article in the "Münchner Merkur" and the "Frankfurter Neue Presse" what is now important in the fight against inflation.

In what many are calling a historic move, the ECB raised interest rates in September by an unprecedented 75 basis points on all three rates. According to Wieland, however, inflation is still far from under control."Only the older generation in this country can remember inflation rates of 7.9 percent most recently in Germany, when, as a result of the Yom Kippur War and oil embargo, inflation rose so high in the winter of 1973," Wieland recalls. He points out that despite the interest rate move, the ECB's monetary policy remains very expansionary. "Real interest rates - interest rates adjusted for inflation - remain deeply negative and support aggregate demand."The ECB Governing Council must agree to raise interest rates significantly more, step by step, over the course of the next few months, Wieland urges. "But once energy prices stop rising, inflation will fall back to the core inflation rate. Then many will want to declare 'success' instead of holding out until core inflation actually comes back down."With energy prices rising and a recession looming, the situation becomes even more difficult. "But recession alone will not end inflation," Wieland warns.

Münchner Merkur: "Worauf es bei der Inflationsbekämpfung jetzt ankommt"