CAPTION: Deutsche Bank boss Christian Sewing speaks at the opening conference of the Euro Finance Week and warned of inflation rises. (picture alliance/dpa)
Deutsche Bank boss Christian Sewing is urging an end to ultra-loose monetary policy in Europe in view of rising inflation rates. "The supposed panacea in the past years - low interest rates with supposedly stable prices - has lost its effect, because now we are struggling with its side effects," Sewing, who is also president of the Association of German Banks (BdB), said at the start of Euro Finance Week in Frankfurt.
Inflation rates in Germany and the eurozone have been climbing significantly for months. The annual eurozone inflation rate reached 4.1 per cent in October in the 19-member eurozone, largely due to a surge in energy prices.
The European Central Bank explains the rise in consumer prices largely as linked to specific factors such as the recovery of oil prices after the coronavirus as well as supply bottlenecks due to the significant increase in demand. In Germany, specially low VAT rates from last year are no longer in force, meaning prices have gone up since then.
Sewing stressed however that the economists of Germany's largest bank do not share the central banks' opinion that rising inflation is a temporary effect.
"Personally, what I hear in discussions with our customers makes me sceptical with regard to monetary stability. They are all preparing for high inflation rates to last longer. And we know what that means: if inflation expectations rise, then inflation usually rises at some point - and in the longer term." Monetary policy must take countermeasures, Sewing demanded - "and sooner rather than later." "The consequences of this ultra-loose monetary policy will become increasingly difficult to heal the longer the central banks fail to take countermeasures," he concluded.
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