The chief executive of Germany’s largest bank has called on central banks to tighten monetary policy to come up with “countermeasures” against rising inflation, which he warned is creating side effects are risky and will last longer than policymakers expected.
Deutsche Bank CEO Christian Sewing said: “The method that was supposed to have cured all the years – low interest rates with seemingly stable prices – has lost its effect, now we are struggling. with side effects. Monetary policy has to combat this – and sooner or later.”
Speaking at a conference in Frankfurt on Monday, he added: “The consequences of this super-loose monetary policy will become increasingly difficult to overcome if central banks do not come up with countermeasures. for a longer period of time”.
May is a longstanding criticism of the European Central Bank’s use of negative interest rates to stimulate the economy.
His comments reflect the aversion of many German banks to negative interest rates, which they say have eroded their profit margins. They also highlight growing concern about the German inflation increased to a three-decade high of 4.6% in October.
According to IMF data, the $27 billion increase by governments, businesses and households globally to $226 billion last year, is “simply unsustainable in the long-term and is a potentially difficult point.” continuity for global financial markets,” warned Sewing.
The head of Deutsche Bank, one of Europe’s largest service providers in the debt market, said: “The extremely loose spending policies of many governments can only be achieved through a monetary policy. the equivalent of a powerful intervention in the valuation in the bond market”.
But on the contrary, this has significant risks and side effects: inflation is rising around the world faster than any economist could have predicted a year ago, he added.
While many central banks around the world are tightening monetary policy by ending asset purchases and raising interest rates, the ECB is expected to continue buying bonds for at least another year and insists. interest rate hike is still a distant prospect.
Christine Lagarde, president of the ECB, said on Monday that while rising inflation is a major concern for eurozone citizens, “the medium-term inflation outlook remains to be softened”. She added in a speech to the European Parliament that the conditions for the ECB to raise interest rates are “very unlikely to be satisfied next year”.
In contrast, US Federal Reserve Vice Chairman Richard Clarida last week said the “necessary conditions” for US interest rates to rise from the current near-zero levels would be met by the end of next year if the economy progress as expected.
Bank of England Governor Andrew Bailey also said the BoE “won’t make it difficult” when it comes to the possibility of a rate hike, if the economy develops in line with its forecasts.