The new president of the Central Bank of Germany Joachim Nagel, on the day of his official appointment, January 7, 2022 in Berlin (POOL / AFP / Archives / Britta Pedersen)
Monetary policy in the euro zone must “remain on guard” in the face of inflation which could remain high for longer than expected, the new president of the Central Bank of Germany warned on Tuesday, following in the orthodox tradition of the institution.
While the economic horizon is marked by great uncertainties, “one thing is very clear: if price stability is required, the Council of the European Central Bank must adjust the course of its monetary policy,” said Joachim Nagel in his speech to take office in Frankfurt.
The 55-year-old economist takes the reins of an institution highly respected in Germany for eight years for its visceral commitment to financial stability.
Excellent connoisseur of the “Buba” for having worked there for seventeen years, he replaces Jens Weidmann, figure of monetary orthodoxy, often in the minority within the ECB when deciding on a very expansive policy course. monetary. Mr. Weidmann resigned before the end of his term.
This accommodating course, reinforced to mitigate the impact of the Covid-19 pandemic, “should not be set for too long”, hammered Mr. Nagel, and “in all cases” monetary policy must “remain on its guard “in the face of inflation.
Inflation in the euro zone (AFP / Archives /)
Inflation in the euro zone, at 5% in December, has reached a historically high level since the introduction of the single currency, and is well above the 2% target set by the European Central Bank (ECB ) medium term.
And the medium-term price outlook remains “very uncertain,” Nagel said, amid geopolitical conflicts and persistent shortages of industrial components.
“We have instructions on how to react when inflation deviates from our target in both directions,” assured Christine Lagarde, President of the ECB, speaking at the ceremony.
Facing several crises since the entry of the euro, the Governing Council of the ECB “has ventured into uncharted territory”, and its latest exceptional measures “have left their mark”, observed Jens Weidmann, a relative of Angela Merkel who led the Buba for ten years.
The mountains of debt accumulated by states by letting go of budgetary discipline to support their economies, especially since the outbreak of the pandemic, can “constitute a major risk for monetary policy,” he warns.
Close to the Social Democrats who succeeded the Conservatives in the Chancellery, Mr. Nagel nevertheless promised to “join the cautious line” of the Bundesbank, which promises lively debates within the ECB during the next monetary policy choices.
© 2022 AFP
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