Friedrich Joachim Nagel, President of the Federal Bank, predicts that interest rates are likely to increase in June. According to the “Redaktionsnetzwerk Deutschland” the increasing probability of a rate hike stems from persistent high inflation and the situation in the Middle East.
Nagel noted that while everyone hopes the geopolitical situation will stabilize and energy prices-particularly oil and gas-will drop significantly, the Bank expects to raise rates in June if market prospects do not show noticeable improvement.
Currently, the European Central Bank (ECB) left its key rates unchanged at the end of April. This means the deposit rate, which is important for savers, remains at 2 percent. Despite this, the ECB Council showed “firm determination” to adjust its monetary policy to stabilize inflation at its 2 percent target level over the medium term. A rate increase is considered a key instrument to achieve this goal.
In his discussion, Nagel stated that the decision-making process for the ECB Council centers on the inflation forecast, along with the expectations of markets, consumers, and businesses. He stressed that they are monitoring current inflationary trends, especially how rising energy costs impact other goods, services, and wages. Should the data suggest a picture of significantly increasing medium-term inflation, he concluded that raising interest rates “is necessary”.