ifo President Clemens Fuest has welcomed the European Central Bank’s decision to raise interest rates. “Better late than never,” he said in Berlin on Thursday. “The 0.75 percent increase is a step in the right direction. Nevertheless, monetary policy remains very expansionary. Over the coming months, further interest rate increases will have to follow. Interest rates are still very low, and private households’ inflation expectations are constantly climbing higher. The ECB hasn’t yet begun to run down its existing stock of government bonds; bonds that reach maturity are being replaced with new purchases. It’s crucial that the ECB does indeed deliver the promised additional interest rate increases soon. Delaying the exit from expansionary monetary policy on account of an expected economic downturn would only push up the cost of combating inflation. Moreover, the downturn is due above all to supply shortages, which is why it is right for the ECB to dampen demand.”
ECB: “Better Late than Never”
