Germany may slip into recession if energy crisis escalates, Bundesbank chief warns

By Beyza Binnur Donmez

ANKARA (AA) - The Bundesbank chief has warned that a possible recession will knock on Germany's door if the energy crisis escalates, urging the European Central Bank (ECB) to continue increasing rates.

"If the energy crisis worsens, a recession seems likely next winter," Joachim Nagel told German daily Rheinische Post in an interview published on Saturday.

"The German economy still performed quite well under difficult conditions in the first half of the year. However, if further delivery problems are added, for example, due to prolonged low water levels, the economic prospects for the second half would deteriorate further," Nagel added.

He stressed that Germany's inflation rate is "possible" to hit 10% in the autumn months and added that double-digit inflation rates were last measured in the country more than 70 years ago.

On his expectations about the ECB's next interest rate decision on Sept. 8, he said: "Given high inflation, further interest-rate hikes must follow."

"The past few months have shown that we have to decide on monetary policy from meeting to meeting," the chief continued.

The central bank decided to raise the key interest rates by 50 basis points in July to take "further key steps to make sure inflation returns to its 2% target over the medium term."

"It will be crucial to keep medium-term inflation expectations stable at 2%," Nagel said. "I am convinced that the Governing Council of the ECB will take the necessary monetary-policy measures."