German economic institute critical of ECB moves
Earlier hikes would have kept inflation at 3
ECB policymakers say bank caught up with large moves

BERLIN, Oct 16 Reuters The European Central Bank has fuelled inflation in the monetary union with policy that is too hesitant, according to a study by the German Institute for Economic Research DIW, seen exclusively by Reuters on Wednesday.

With a gradual increase in key interest rates from mid2021 inflation would have gone up to a maximum of 3 instead of more than 10 in August 2022, according to the study.

As inflation rose from mid2021 and jumped with the start of the Russian invasion of Ukraine in February 2022, the central bank initially decided against raising interest rates and it only ended its zero interest rate policy in July 2022.

One of the reasons given by the ECB for its hesitant response was that its monetary policy could not influence energy prices, said Ben Schumann, the author of the study. But this assumption is wrong, as our observations show. It could have tackled the last wave of inflation directly at its roots.

Monetary policy had an effect on energy prices on the global market because higher key interest rates depressed demand for energy from the eurozone, the study said.

In addition, with earlier interest rate hikes, the euro would have appreciated against the dollar, which would also have dampened energy prices, which are usually paid in the US currency on global markets, according to the…