“If price stability is required, the Council of the European Central Bank must adjust the course of its monetary policy,” said Joachim Nagel.
Monetary policy in the euro zone must “remain on its guard” in the face of inflation which might 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”, declared Joachim Nagel in his speech to take office in Frankfurt.
The 55-year-old economist has taken the reins of an institution highly respected in Germany for its visceral commitment to financial stability for eight years.
An excellent connoisseur of “Buba” having worked there for seventeen years, he replaces Jens Weidmann, a 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, strengthened to mitigate the impact of the Covid-19 pandemic, “should not be set for too long”, hammered Mr. Nagel, and “in any case” monetary policy must “remain on its guard In the face of inflation.
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 traces”, 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 took over from 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.