The new Bundesbank President Joachim Nagel sees the increased inflation rates with concern and called for an adjustment of European Central Bank monetary policy at a ceremony broadcast on the Internet to mark the Jan. 11 assumption of the office by Nagel, the successor of Jens Weidmann. Nagel sees “currently rather the danger that the inflation rate could remain elevated for longer than currently expected,” and stressed, “With all the uncertainty, one thing is very clear: If price stability requires it, the ECB Council must act and adjust its monetary policy course.”
Nagel’s appointment was welcomed by the head of Saving Banks Association Helmut Schleweis, who urged for Nagel to engage in fighting inflation “with full determination.” “It is about preparing the exit from the ultra-expansionary money policy, together with central banks in the euro system. This includes, in perspective, the exit from negative rates as well.”
On paper, Nagel has less chance than Weidmann to get through with his view in the ECB, now that dove Isabel Schnabel has replaced hawk Sabine Lautenschläger on the ECB executive board. However, a changed inflation picture and a possible shift of policy by the U.S. Federal Reserve could change the game.
It remains to be said that tightening of monetary policy will open irreparable cracks in the system. As Lyndon LaRouche had repeatedly stated, central banks are in a bind and the only way out is a bankruptcy reorganization of the system.
