Bundesbank President Jens Weidmann has warned against ignoring the uncertainty surrounding future price developments. “We also need to keep an eye on the risks to the price outlook. In my view, the risks are tilted to the upside right now,” he said at the Bundesbank symposium “Banking supervision in dialogue”.

The Bundesbank has been directly confronted with the fallout from the devastating floods that hit North Rhine-Westphalia and Rhineland-Palatinate in mid-July. It is analysing and replacing soaked and damaged banknotes in a process allowing affected inhabitants to be reimbursed with the value of their damaged cash. Bundesbank Executive Board member Johannes Beermann visited the National Analysis Centre for Counterfeit and Damaged Banknotes and Coins in Mainz for an update on the progress made so far.

The Bundesbank assumes that inflation rates in Germany will continue to rise. Its experts write that, as things currently stand, inflation rates of between 4% and 5% will be possible at the end of the year. Inflation is then likely to stabilise again to a marked extent in early 2022, but could remain above 2% up to mid-2022.

The Bundesbank’s Research Centre has published its 1,000th discussion paper. In this anniversary issue, economist Arne Halberstadt investigates how expert surveys can be used to model interest rate expectations.

Bundesbank Executive Board member Joachim Wuermeling says German banks proved to be robust in the EU-wide stress tests conducted by the European Banking Authority (EBA) and the European Central Bank (ECB). “They would consistently meet the high capital requirements, even in a severe economic crisis,” said Mr Wuermeling.

In the first half of 2021, the Bundesbank recorded approximately 21,400 counterfeit euro banknotes with a nominal value of €1 million. This represents a decline of 13% compared with the second half of 2020. This is due to the coronavirus restrictions, said Bundesbank Executive Board member Johannes Beermann.

The digital transformation is increasingly putting German banks to the test. As this unfolds, it is important to not lose sight of security, particularly with banks becoming a growing target for professional hackers, the Bundesbank’s economists write in the latest issue of the Monthly Report. They warn that technology alone is not enough to stay ahead of digital risks.

German economic activity likely grew strongly in the second quarter, largely offsetting the severe setback it suffered in the first quarter, the Bundesbank writes in its current Monthly Report. The services sector in particular contributed to the considerable recovery. Inflation is likely to rise as the year progresses.

The Governing Council of the European Central Bank (ECB) has decided today to launch the investigation phase of a digital euro project. Following the decision, the President of the Eurogroup Paschal Donohoe joined the meeting, congratulated the Governing Council and expressed his full support for the project.

Bundesbank President Jens Weidmann believes the new strategy will help monetary policy maintain price stability for the people of the euro area. “A medium-term inflation rate of 2% is a clear and easily understandable objective. We are not striving for either lower or higher rates. That was important to me,” was how Mr Weidmann assessed the outcome of the strategy review.