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Negative interest rates are a thing of the past

The governor of the German central bank, the Bundesbank, Joachim Nagel, called for a rapid rise in interest rates at the European Central Bank (ECB) in order to curb the rise in prices, AFP reported.

“When you are in the context of inflation of around 7 percent, the conclusion is that interest rates need to rise,” Nagel said after a meeting of G7 financial leaders in Germany.

“Certainly negative interest rates are a thing of the past,” he added.

At a meeting of G-7 finance ministers and central bankers (the United States, Japan, Canada, France, Italy, Britain and Germany), fighting inflation became a priority as Ukraine’s war raises food and energy prices.

“We see inflation as a great danger,” said German Finance Minister Christian Lindner, whose country holds the G7 presidency.

Major central banks, including the US Federal Reserve, have been forced to raise their key interest rates, which have been kept at historically low levels for years, in the current context of price stagnation.

According to Nagel, the first increase in the ECB’s interest rates could probably be decided in July, followed by other increases.

The ECB has not raised its interest rates since 2011.

“Inflation dynamics have changed profoundly in a very short time, leading to a change in monetary policy in most G7 countries,” said the German central banker. He called for monetary policy to remain prudent and, if necessary, for further measures to ensure price stability in the medium term.

Some economists warn of the danger of weakening activity if interest rates rise too sharply, AFP notes.

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