The Bundesbank says "much remains to be done" and anticipates further rate hikes without giving in to political pressure

MADRID, 3 Nov.

The Bundesbank says "much remains to be done" and anticipates further rate hikes without giving in to political pressure


The president of the Bundesbank, the central bank of Germany, Joachim Nagel, has underlined the seriousness of the current situation, in which there is a significant gap between inflation and the goal of the European Central Bank (ECB), so it will be necessary to undertake more increases in interest rates without yielding to political pressure during the monetary normalization process.

"There is still a gap between our objective of 2% and the current inflation of 10.7%. There is much to be done, we have to make more increases", Nagel stated during his speech at an event organized by Nueva Economía Fórum, where he recalled the "meeting by meeting" approach of the Governing Council of the ECB, which will act according to the data.

In this sense, the German central banker has defended that the situation in the euro zone, particularly affected by the consequences of the war in Ukraine, "is completely different from that of the United States", so that at the beginning of 2022 it was not possible anticipate what has happened and its impact on inflation.

In this way, Nagel has insisted that the ECB has to focus on its work, marked by the price stability mandate in the medium term, but taking into account the context. "It's a journey we've started, but you can't say when it ends," he summed it up.

Likewise, in addition to defending the independence of the central bank, the president of the Bundesbank has pointed out that episodes such as the one experienced in the United Kingdom show the importance of a certain coordination between fiscal and monetary policy.

In this sense, he has warned that what governments do fiscally should not entail additional fiscal stimuli and thus trigger more inflation, which would not be useful for monetary policy.

"This challenge of reducing inflation and doing everything possible so that the economy improves is only possible by joining efforts," he pointed out, adding that the ECB's monetary policy is not directed at a specific country, but for the entire Eurosystem. "If European politicians understood it, it would be fantastic," he concluded.

In this way, he explained that the new instrument to combat fragmentation (TPI) is a monetary policy tool designed for exceptional circumstances and not a financing instrument for some countries.

Likewise, while he has avoided directly assessing the new banking tax in Spain, limiting himself to recalling that it is a matter for politicians and the importance of improving the resilience of the banking system in a context of rising rates and the foreseeable worsening of the economic situation, he did underline that speeding up the process related to the European recovery fund "would be of great help" from the monetary point of view.

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