The 55-year-old economist succeeds Jens Weidmann as head of the Bundesbank.
(Photo: dpa)
Frankfurt ECB President Christine Lagarde greeted the new Bundesbank President Joachim Nagel with a few words in German. “Welcome home, dear Joachim,” she said with a French accent on Tuesday at the handover ceremony. An allusion to the fact that Nagel worked for the central bank for a long time in the past.
The 55-year-old economist worked for the Bundesbank for 17 years and therefore knows the institution very well. “The people in Germany rightly expect the Bundesbank to be an audible voice of the stability culture. I can assure you: it will stay that way, ”he said at the virtual event at which the previous Bundesbank President Jens Weidmann was also bid farewell. At the same time, he began his tenure with a warning about inflation risks. The medium-term price outlook is extraordinarily uncertain. “I currently see the risk that the inflation rate could stay high longer than currently expected.” Monetary policy must therefore be on guard.
In a difficult environment, Nagel succeeds Jens Weidmann, who headed the Bundesbank for eleven years. In the past few months, inflation in the euro area has risen to five percent, and in Germany it is even higher. The ECB and many experts initially assumed that the high inflation rates would normalize again this year when certain special effects expire. However, this view is controversial. Last week, ECB director Isabel Schnabel warned that higher energy prices could drive inflation higher for longer.
Federal Finance Minister Christian Lindner, who also took part in the ceremony, took up this comment. He is watching the debate and believes it is right to be sensitive to this issue. “A lot of people are looking at the development of inflation these days.” People with lower incomes are particularly dependent on the stability of their monetary value.
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Continuity in basic positions
Nagel emphasized that he wanted to build on the previous line of the Bundesbank. The German central bank had drawn attention to inflation risks at an early stage. She warned not to fix the very expansionary course of monetary policy for too long and to keep options for action open. “Because despite all the uncertainty, one thing is very clear: if price stability requires it, the Governing Council must act and adjust its monetary policy course,” said Nagel.
He also emphasized the traditional positioning of the Bundesbank with regard to national debt. “Solid public finances are very important protection for the common monetary policy.” Therefore, it is part of the job description of every Bundesbank president to “give critical advice from time to time”.
It is essential that monetary policy does not come under pressure to ensure the solvency of states. In the debate about the reform of the European fiscal rules, Nagel urged that high debt ratios be reduced reliably.
In addition to these traditional lines of the Bundesbank, Nagel showed himself to be open to taking climate aspects more into account in monetary policy. In his view, this does not contradict a narrow interpretation of the mandate of price stability. Because climate change and climate policy would also have an impact on inflation and growth. It is also important to keep an eye on the associated risks in order to protect the central bank’s own balance sheet.
Development of a digital euro
Nagel also wants to set accents through greater diversity and openness within the Bundesbank and faster digitization of the central bank. His objective is a digitally networked organization that can adapt more quickly to changes and that knows how to use the potential of emerging technologies consistently.
He also sees the development of a digital euro as positive. From his point of view, it is crucial that this brings clear additional benefits to the people in the euro area, for example by lowering costs or enabling new services.
A possible introduction must be well prepared – also with a view to possible effects on the banking system and financial stability. Nagel’s predecessor in office Jens Weidmann had repeatedly warned of the dangers for the financial system from a digital euro.
Weidmann wished his successor all the best in his new position. “Without a doubt, you are the right person for the challenges of the Bundesbank President.” He also recalled that when Nagels left the Bundesbank five years ago, he prophesied that he would remain a central banker.
More: The five challenges facing the new Bundesbank boss