The savings bank president fears higher inflation in the longer term.
(Photo: dpa)
Frankfurt The Savings Banks expect inflation to remain high. In clear words, Sparkasse President Helmut Schleweis emphasizes the risk that “the higher price pressure will remain with us for longer”.
For the current year, the chief economists of the savings banks in Germany expect an inflation rate of 3.2 percent, for the euro zone of three percent.
“Continued higher inflation in connection with the low and even negative interest rates leads to a creeping ‘deprivation’ of the middle class in our country,” warned Schleweis on Wednesday. “Savings in financial assets continue to lose value.” This danger becomes all the greater the longer monetary policy idly watches the sharply rising prices at the expense of consumers.
Uwe Dürkop, chief economist at Berliner Sparkasse, also points out that 50 percent of German households have “no room” for price increases.
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Schleweis called on the European Central Bank (ECB) to change its monetary policy. “It is time for decisive monetary policy action. The ECB must succeed this year in leaving the negative key interest rates behind.” He pointed out that the US Federal Reserve has announced interest rate hikes in 2022.
Inflation rate rose more than many economists expected
So far, the ECB has cemented its expansive course with the announced further bond purchases beyond 2022, said Schleweis, who heads the German Savings Banks and Giro Association. “Up to now, there are no foreseeable increases in key interest rates. Rather, one is clinging to the hope that the enormous rise in prices will be of a temporary nature. In my view, that is a misconception.”
Dürkop considers it necessary “to send signals that the inflation rate is being brought under control”.
As was announced on Wednesday, the inflation rate in the euro area rose again at the beginning of the year – more than economists had forecast. Prices rose by 5.1 percent, according to an initial estimate by the European statistics office Eurostat.
However, data from individual EU countries such as Germany published at the beginning of the week had already indicated a higher value. In December, the price increase was exactly five percent.
This is heating up the debate on the central bank’s course ahead of the ECB Council meeting on Thursday. In December, they decided that they would largely stick to their very loose monetary policy this year and only slowly reduce their massive purchases of bonds.
Desire for normalization of the savings rate
The key interest rate is currently zero percent. Commercial banks have to shell out a penalty interest rate of 0.5 percent for their short-term deposits with the ECB. The financial institutions pass these negative interest rates on to large customers and also to an increasing number of private customers as a “custody fee”. You also have to pay negative interest of 0.5 percent above certain exemption amounts.
As a result of the corona pandemic, the savings rate had risen significantly, as did short-term deposits at savings banks, which weighed on banks due to the negative interest rates. The savings banks are the market leaders in the German banking market.
“We therefore want the savings rate to normalize – so that consumption can pick up again, but also to relieve our own burden,” said Schleweis. The chief economists of the Savings Banks Group are assuming a strong recovery in Germany and in the euro zone. They think economic growth of 3.5 percent is possible for 2022, and then 2.6 percent for 2023.
More: Inflation dispute: The Governing Council of the ECB is divided along these lines