Bundesbank Chief: Inflation in the Eurozone is Hindering Personal Consumption

High inflation in the Eurozone is hindering personal consumption, and prices are likely to rise sharply for some time, warned the governor of the German central bank Joachim Nagel.

– I would like to believe that we will, hopefully, see better inflation figures – said Nagel on Monday. However, data shows that the inflation rate will remain high for some time, added the Bundesbank governor.

Oil prices fell last week, and the growth of producer prices in Germany also eased in October, with a growth rate of 34.5 percent, following a 45.8 percent jump in September and August. This has sparked hope that inflation may be easing.

The governor of the German central bank emphasizes that the inflation rate in Germany is likely to remain high next year, estimating that it will ‘likely’ average around seven percent. High inflation is a heavy burden for the entire Eurozone, Nagel stressed.

– The enormous pressure on price growth is broad-based and is hindering demand, especially personal demand – said Nagel. He also added that the European Central Bank (ECB) will raise interest rates again in December to bring inflation down to the targeted two percent in the medium term.

Germany has enough cash

Bundesbank Executive Board member Johannes Beerman separately emphasized that they have enough cash in case of power outages and other potential crises that could be caused by energy shortages. There is enough cash for five days, Beerman added, noting that the Bundesbank does not expect power shortages in larger parts of the country.

His statement follows last week’s media reports that German financial authorities are preparing crisis plans in case of a prolonged power shortage. The plans include a possible limit on cash withdrawals, media reported. A Bundesbank official denied the media reports.

The experience of the Bundesbank shows that during a crisis, citizens’ demand for banknotes and coins usually increases.

– When the situation becomes critical, people in Germany want to have cash – said Bermann, highlighting the example of the financial crisis in 2008 and the COVID-19 pandemic.

However, there is an emergency communication network in case of a crisis, which includes banks, credit institutions, and cash transport companies, he explained, asserting that the central bank will not impose a limit on cash withdrawals in the event of a crisis.