ECB rate hike: How large is the risk of inflation?

Thomas Mayer, Deutsche Bank, agrees with the policy of the ECB to increase key lending rates to a neutral level. Even more important for maintaining the stability of the euro would be for the ECB to cease financing countries, and their banks, that are threatened with default. Holger Schmieding, Berenberg Bank, sees no danger of inflation; for Germany he foresees an annual price increase of just over 2%. Manfred Jäger Ambrozewicz, Cologne Institute of the German Economy, argues that the ECB has implemented an appropriate interest rate policy and that the interest rate path is suitable. Michael Lamla and Jan-Egbert Sturm, ETH Zurich, stress that the ECB has enough credibility and transparency to influence and homogenise inflation expectations. In their view, the overall rise in the euro area inflation expectations for next year will continue, but without reaching troubling levels. Ulrich Kater, DekaBank, views the credibility of inflation policies and monetary stability as the main objective of independent central banks. Leon Leschus, HWWI, believes that high commodity prices will continue to contribute to inflationary pressures. It would therefore be desirable if the ECB continued the tight monetary policy it has begun. Hans Wolfgang Brachinger, University of Fribourg, sees growing inflation risks for Germany in light of more expensive raw materials, increasing speculation and rising production costs in China, regardless of the actions of the ECB.