Bundesbank chief warns against using ECB's tools to contain wider spreads
By Alexander Bueso
Date: Monday 04 Jul 2022
(Sharecast News) - The head of Germany's central bank urged caution on using policy tools to limit the borrowing costs of weaker economies within the single-currency bloc.
In a virtual speech to an audience in Frankfurt, Joachim Nagel, said such tools should only be used under "exceptional" circumstances and narrowly defined conditions.
That was in part because it was "virtually impossible" to know whether bigger risk premia on some sovereign debt were justified or not.
"One can easily find oneself in dire straits," he added, according to Bloomberg.
During the same speech, Nagel also indicated that the European Central Bank's inflation outlook could "quite possibly" need to be revised higher again in its next round of forecasts due out in September.
Hence, barring improvement, "a more sizable interest rate hike would be completely appropriate" Nagel said, including, ultimately, a "restrictive" policy.
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