ECB’s Nagel: ‘Must Not Let up Our Monetary Policy Efforts Towards Bringing Inflation Back Down’
16 December 2022
By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Joachim Nagel on Friday said that the ECB had to continue striving to restore price stability.
In a press release accompanying the newest macroeconomic projections of the German Bundesbank, which he heads, Nagel said that ‘we must not let up our monetary policy efforts towards bringing inflation back down to our target of 2%.’
‘Inflation is high and will decline only gradually’, he said. German HICP is projected by the Bundesbank to decline from 8.6% this year to 7.2% next year, 4.1% in 2024 and 2.8% in 2025, while core inflation is seen at 2.6% in 2025.
‘While economic output is likely to contract initially, we expect that the economy will gradually recover from the second half of 2023 onward’, he said.
The German central bank sees domestic GDP growth to fall from about 1.8% this year to -0.5% next year, 1.7% in 2024 and 1.4% in 2025. Macroeconomic capacity utilisation would return to normal levels only in 2025, it said.
According to the Bundesbank, the projections are subject to unusually high uncertainty, including Russian military aggression and the energy crisis, government measures and high inflation.
‘The risks to economic growth are tilted predominantly to the downside, mainly due to potential shortages in the supply of energy’, the Bundesbank said. ‘With regard to inflation, upside risks predominate.’