BOJ Governor: "Inflation is like a Galapagos Tortoise... We Must Not Be Complacent"

Eurozone Production Capacity to Recover to Pre-COVID Levels in Q1 Next Year... ECB Should Gradually Reduce Quantitative Easing

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Park Byung-hee] Jens Weidmann, President of the German central bank Bundesbank, likened inflation to a Galapagos tortoise, stating that "inflation does not die."

The Fernandina giant tortoise, thought to have gone extinct in 2019, was discovered on the Galapagos Islands after 113 years, attracting attention. President Weidmann mentioned the Galapagos tortoise as a warning that although prices have remained low for a long time, inflation can occur at any time.

According to major foreign media on the 28th (local time), President Weidmann warned that inflationary pressures are increasing within the Eurozone and argued that the European Central Bank (ECB) should gradually reduce the scale of asset purchases through quantitative easing policies.

He predicted that Eurozone productivity would recover to pre-COVID-19 levels by the first quarter of next year. He also emphasized that quantitative easing should end immediately once economic recovery is confirmed, cautioning against abruptly stopping quantitative easing measures and stating that the scale of net purchases should be gradually reduced in advance.

Last month, the Eurozone Consumer Price Index (CPI) rose 2% year-on-year, surpassing the ECB's monetary policy target of "maintaining close to 2%" for the first time in over two years. The ECB will release the June CPI inflation rate on the 30th. In a Bloomberg survey, economists expected a 1.9% year-on-year increase, indicating a slight slowdown in the upward trend.

However, President Weidmann warned, "In my view, the risk of rising prices is spreading increasingly in the Eurozone," adding, "We must not be complacent." He particularly noted the risk that prices could rise more than economists expect, as many governments are rolling out various eco-friendly policies to address climate change.

President Weidmann pointed out, "If oil prices do not fall as expected, prices will continue to rise next year," and added, "Political circles are pushing out climate change policies, which are factors driving up energy prices."

Germany began imposing a carbon tax this year, and the CPI inflation rate in May recorded 2.4%. President Weidmann noted that the German CPI inflation rate could rise to 4% in the second half of this year, warning that such inflationary trends reduce household purchasing power.

This content was produced with the assistance of AI translation services.