This may include adverts from us and 3rd parties based on our understanding. He argued that all other central banks in the world are already ahead of the curve when it comes to find a solution to inflation worries. Except the ECB, because it has to take the situation in southern European into account he wrote. As inflation is pushing the cost of petrol to record levels across the world, Mr Fruhauf added: Whether the inflation is only temporary or permanent, this discussion does not matter to drivers. They can see inflation and thus the devaluation every day by looking at petrol station prices. A litre of gasoline costs more than ever before, and the price of fuel is at the edge of a record.
With the increase in gas and oil, it becomes clear quickly that the inflation is affecting the overall population. All major central banks except EC have an advantage now because they do not have to take into account the different economic policies in the countries of a monetary union. The Fed or the Bank of England can now start tightening their monetary policy to contain inflation worries. On the other hand, the ECB continues to hope for a temporary effect that will soon subside. What should the ECB do? If not, and especially in the case of commodity prices, they are risking their credibility in the fight for monetary stability. That would be a problem because the trust of the population is essential for central banks. It will be lost if the impression prevails that the ECB is avoiding government bond purchases and raising interest rates because heavily indebted countries in southern Europe cannot afford it. The ECB has to get out of this dilemma. Analysts also said growing rate hike bets would have been expected to cause meaningful moves on the yield spreads between Southern European and German bonds and a sharper rise in eurozone inflation-linked bond yields. ECB policymaker and French central bank chief Francois Villeroy de Galhau said there is no reason why the bank should increase rates between now and the end of next year.