Bundesbank President Joachim Nagel at the FAZ Congress ©Nils Thies

Nagel: “Time for the next steps”

Bundesbank President Joachim Nagel has spoken out in favour of not waiting too much longer to proceed with the next steps towards a normalisation of monetary policy. “The era of negative interest rates should come to an end soon,” stated Mr Nagel, speaking at an event organised by the German daily newspaper “Frankfurter Allgemeine Zeitung”. The Eurosystem should not hold back because of the tricky state of the real economy, either. Overall, Mr Nagel expressed optimism in monetary policy’s ability to fulfil its mandate and was confident that inflation will return to 2% over the medium term.

Inflation: the major topic of 2022

Mr Nagel stressed that inflation was currently far too high, with households with small and medium incomes, in particular, feeling the strain. According to the Federal Statistical Office, price inflation in Germany as measured by the Harmonised Index of Consumer Prices (HICP) stood at 7.8% in April; Eurostat estimated euro area inflation at 7.5%.

Mr Nagel noted that the fact that inflation would be the major topic for 2022 was already plain to him when he took up office in January. He added that the Governing Council of the ECB was right to set out a clear position for the first time in its March meeting, paving the way for the turnaround in monetary policy under difficult conditions. “And now it’s time for the next steps. We cannot wait too long,” he argued.

Central banks have to safeguard stable prices in the medium term

Mr Nagel pointed out that there were some factors, such as supply in the goods markets, that monetary policy could not control. “But, as central banks, we can and must safeguard stable prices in the medium term. That is our mandate and our objective.