Combating inflation: the procrastinators in Frankfurt's Ostend

Dealing with the unexpectedly sharp rise in the inflation rate and the high level of uncertainty about the future dangers of inflation is shared by the world's major central banks.

On Wednesday the American Federal Reserve announced that it would first reduce its purchases of securities and end it in the spring of next year.

Soon after, the central bank is likely to begin raising its key interest rate.

The US inflation rate was 6.8 percent in November, the economy is doing very well, and the central bank is no longer viewing the inflation threat as a temporary problem.

In London, the Bank of England raised its key interest rate on Thursday after the inflation rate jumped to 5.1 percent.

The inflation rate in Norway is also 5.1 percent, where the central bank reacted on Thursday with a key interest rate hike.

Anyone who reacts too late to inflation pays a heavy price

These days, central banks may also see themselves as climate savers and fighters against social disadvantage.

At the end of the day, they are measured by their contribution to ensuring monetary stability.

All experience teaches: Anyone who reacts too late to inflation pays a high price.

The European Central Bank is putting itself in this danger.

Unlike other central banks, it sticks to its conviction that inflation will prove to be a temporary phenomenon.

With this justification, she managed to reduce her bond purchases, which were exorbitantly high due to the pandemic, on Thursday.

Ab she refuses to give an end time for her purchases.

An increase in the key interest rate is not expected for the coming year.

The reluctance of the institution based in Frankfurt's Ostend proves the fatal clutches in which it is located.

In the opinion of most experts, the ECB should not have had to raise its key interest rate this week, as the inflation rate, which is currently inflated by special effects, is likely to decline a little for the time being in the coming year.

But it would have made sense to name a fixed end point for bond purchases, like the American Federal Reserve, because despite Omikron, the economic situation offers no justification for sticking to monetary policy measures that should only apply in times of need.

Of course, the ECB is operating in an extremely difficult environment.

The pandemic has widened rather than narrowed the differences in the economic strength of the member states.

The € 750 billion EU reconstruction fund is little more than an admission that the investments necessary for an overdue modernization of the European economies can no longer be financed by all countries on a national basis alone.

Since the outbreak of the pandemic, the ECB has single-handedly financed new government borrowing in several countries with its bond purchases, while private investors have sold bonds from the affected countries as a precaution.

The heavily indebted euro countries are putting pressure on the ECB and Brussels

Of all countries, which, because of their high levels of debt, would probably have considerable difficulties in selling their bonds at low interest rates on the free market, there are now calls for a relaxation of the European debt rules.

This is based on the assumption that, in the event of doubt, the ECB will continue to secure public financing in the future.

The fact that even the soft-growing announcements by the ECB on Thursday caused slight unrest on the bond market shows how much the financial sector sees the ECB as a guarantor of financing future massive public spending at low interest rates.

This is a dangerous development for the credibility of the central bank - and quite a few members of the central bank council seem obviously aware of it. Because the discussions on Thursday were probably more controversial than President Lagarde admitted in the subsequent press conference. It is true that only a small minority of the members flatly rejected the resolutions. However, several members who ultimately approved the resolutions also expressed clear concerns.

The ECB justifies its continued adherence to bond purchases, among other things, with the expectation of a rate below its inflation target of 2 percent of 1.8 percent in each of the years 2023 and 2024. However, these deviations are firstly minimal and secondly inflation rates cannot be spread over several years estimate precisely.

Finance ministers and fund managers in financial markets may enjoy sticking with bond purchases.

The hesitation of the ECB is damaging the reputation of monetary policy.