Central Banks of Germany and France say that inflation will return to 2%

The representative of the European Central Bank from two major regional economies declared that they plan to get inflation back to its 2% target. 

Bundesbank President Joachim Nagel and Bank of France’s head Francois Villeroy de Galhau spoke in a joint television interview. They said the ECB's tougher policy would help deal with rising prices. According to Villeroy, they are obliged to return inflation to the level of 2% by the end of 2024 or 2025.

The ECB raised the borrowing costs by 200 basis points. Bank plans to increase the rate one more time on December 15. There are also plans to cut the balance sheet of about 5 trillion euros of bonds. In dollars, this amount is 5.3 trillion.

Some officials said they haven’t yet decided how much to increase the step — by 75 basis points or 0.5%. Nagel said the decision will be made based on the latest data. As he stated, the official will have the forecasts for 2023, 2024, and for the first time 2025. They will be the basis for the decision. Nagel believes that the increase in rates should continue.

When asked how long the growth of borrowings will last, Villeroy replied as long as necessary.