The head of the ECB recently promised to stick to the goal of price stability.
(Photo: imago images/Frank Ossenbrink)
The good news is: German inflation has fallen. The bad news: It fell much less than expected, only from 5.3 to 4.9 percent. This continues the series of negative news in price development. And this also increases the risk that the ECB will ultimately underestimate the dynamics that can cause consistently high rates of price increases.
The annual threshold from which a statistical effect ceases to exist due to the temporary suspension of VAT had raised hopes of a more significant decline. But above all the energy prices are difficult to predict at the moment. And in some cases the suppliers only passed them on to consumers at the beginning of the year.
ECB boss Christine Lagarde must not do one thing above all: only reassure, again only refer to the optimistic inflation forecasts of the central bank and again only emphasize that inflation – albeit with a delay – will more or less take care of itself. It would be better to announce in no uncertain terms that the ECB is keeping its options open to do whatever it takes to keep prices under control.
If it turns out that their chief economist Philip Lane, who has long stuck to these inflation forecasts, is right – so much the better.
Top jobs of the day
Find the best jobs now and
be notified by email.
Such a positive scenario cannot be ruled out. The central bankers predicted that the peak would be reached in December, even if the level was a lot higher than expected. A more decisive action by the ECB, so that the momentum of the prices does not increase, is now necessary.
Lagarde should indicate that phasing out of bond purchases is possible as early as this year if necessary. At the same time, it would keep open a faster way to raise interest rates. And if inflation doesn’t fall more sharply next time, it could amplify its message without wreaking havoc on the markets.
More: Inflation in Germany is higher than expected in January