“We are heading into a decade of high volatility, uncertainty, complexity and ambiguity,” Sewing said.
(Photo: Bloomberg)
Frankfurt Deutsche Bank boss Christian Sewing calls on the central banks to take bold steps in the fight against high price increases. “Inflation is not only poison for the economy, but for society as a whole,” said Sewing on Monday at the “Euro Finance Summit” in Frankfurt.
In the euro zone, consumer prices rose by 8.6 percent year-on-year in June. According to the Federal Statistical Office, in Germany they were 7.6 percent above the level of the same month last year.
Many Germans could no longer save or even pay their bills because of the price increases, said Sewing. This threatens the social peace in the Federal Republic. In poorer countries, the potential for conflict is even greater.
“Continued price pressure has huge disruptive potential and increases the risk of a global recession next year,” Sewing warned. “I can’t deny that I’m concerned about what’s in store for us over the next 12 months.”
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In view of the dangers posed by high inflation, higher interest rates are essential, according to Sewing. In his view, the US Federal Reserve should raise interest rates by a further 0.75 percentage points in July. “We would also like the ECB to raise interest rates faster than previously announced.”
However, it is uncertain whether the Deutsche Bank boss will get through with his demands from ECB President Christine Lagarde. At the central bank meeting in Sintra, Portugal last week, the French reaffirmed that she was only aiming for an interest rate hike of 0.25 percentage points in July.
Sewing: “2023 will be even more complicated than 2022”
In addition to inflation, Sewing is also concerned about the war in Ukraine, supply chain problems, the corona pandemic and bottlenecks in the labor market. “In the more than 30 years that I’ve been in the banking business, I’ve never seen a comparable accumulation of risks as I do now.”
In the second quarter, companies’ profits are still high and their order books are full, Sewing said. But that will change, also because of the turnaround in interest rates by the central banks. “Certainly 2023 will be an even more complicated year than 2022 already is.”
Sewing agrees that the West is preparing further sanctions against Russia because of the war in Ukraine, but urges a sense of proportion. “Any additional sanctions must hurt Russia more than us.”
According to Sewing, the consequences of sanctions would have to be thoroughly thought through and named transparently: “A gas embargo against Russia would undoubtedly lead to a deep recession in Germany and many other European countries.”
More: Politicians are discussing these measures at the Chancellor’s inflation summit