Comment: Operation Damage Control

Christine Lagarde acts late, but she acts – and for the first time with verve. The rate hike of 0.75 percentage points is the largest in the history of the European Central Bank (ECB). It was a necessary step, but by no means sufficient, firstly to curb inflation in the long term and secondly to regain lost confidence.

Ultimately, it is a step towards damage limitation – no more, but also no less. Damage limitation because the ECB underestimated the dynamics of inflation for far too long.

And because they tried to lull the world outside of the central bank with their mantra that it was a “temporary” phenomenon to such an extent that it bordered on a denial of reality. Lagarde has openly acknowledged these mistakes. For that she deserves respect.

The President now had to dare to take this interest rate step, although the economic situation could hardly be worse: For Germany, Europe’s largest economy, the IfW is forecasting a minus of 0.7 percent in 2022.