The former chief economist of the European Central Bank (ECB), Otmar Issing, criticized the central bank with unusually clear words.

In an interview with Focus Money magazine, Issing said he was very concerned about the fall in the value of the euro.

"I have always emphasized that the euro will be as stable as the D-Mark," said Issing, who was the ECB's chief economist from 1998 to 2006.

He was often criticized for this, sometimes even ridiculed.

In the first 25 years of its existence, the euro did extremely well when measured against the inflation rate.

"But that's over - unfortunately all too clearly," Issing told the magazine.

Christian Siedenbiedel

Editor in Business.

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One has to honestly admit that nobody could have foreseen the war and the effects of the war.

"This increase in energy prices is an external shock that the ECB could not have foreseen on this scale," said Issing.

She couldn't do anything about it either.

One cannot combat rising gas prices with higher interest rates.

But if you think that in March of this year the chief economist of the ECB, i.e. one of his successors, declared that the inflation rate would be back at two percent or below within two years, and that without doing anything in terms of monetary policy, then it is That's a statement that sounds "absurd" from today's point of view, "but also from the point of view of the time," said Issing.

"The actual failure of the ECB is much further back," said the former chief economist: "The ECB should have gotten out of crisis mode by summer last year at the latest."

In December last year, the ECB announced a course of "normalizing" monetary policy.

At the end of June it stopped its net bond purchases.

In July, it raised interest rates for the first time in eleven years – the next rate hikes followed in September and October.

Commerzbank is raising its forecasts

Jörg Krämer, chief economist at Commerzbank, said on Friday at the presentation of the bank's annual outlook that he expects the ECB to raise interest rates again in December, but probably only by 0.5 and not by 0 as initially thought .75 percentage points.

At the beginning of next year, the central bank will then take another interest rate hike of 0.5 percentage points.

The deposit rate, one of the three key interest rates of the ECB, will then have reached 3 percent.

"The Fed and the ECB will then pause in the spring," says Krämer.

Commerzbank revised its forecasts for economic growth in Germany upwards, for the next year it now expects economic output to decline by 0.5 percent instead of 1.5 percent.

With regard to the gas supply in particular, the bank is no longer as skeptical as it was in September.

"The cup of gas rationing will probably pass us by," said Krämer.

However, he reiterated that, like Issing, he believed the ECB should have raised interest rates sooner.

Blog post by the ECB chief economist

Meanwhile, the ECB's chief economist, Philip Lane, published a blog post on Friday on sources and dynamics of inflation from the central bank's perspective.

In the more than 17,000-word article, he emphasizes the singularity of events that led to the recent surprise rise in inflation - and speaks of the "diagnostic challenge" of identifying the medium-term path of inflation developments in such an environment.

The blog post interprets the increase in inflation since mid-2021 as the “result of extraordinary relative price shocks”, which are initially reflected in a rise in the inflation rate when prices and wages are rigid downwards.

"These relative price shocks reflect the magnitude and scope of the energy, pandemic and war-related shocks."

The best way to assess inflation trends is still comprehensive forecasts.

The current monthly inflation figures are useful, Lane writes.

However, a proper assessment of the likely future path of inflation is “best done within the framework of a comprehensive macroeconomic forecast”.

However, the "conditional nature of inflation forecasts should always be fully appreciated," Lane warned.

For the coming period, the ECB must carefully monitor wage developments.

With wage increases coming in many increments, it will take several years for wages to adjust to cost-of-living increases. Inflation measurement factors are disappearing.”

However, Lane sees no fundamental change in wage dynamics.

This is a temporary catch-up phase.