Joachim Nagel: Tight monetary policy despite Omicron

Frankfurt. As the new head of the Deutsche Bundesbank, Joachim Nagel does not take on an easy legacy. The ultra-conservative stance of his predecessor Jens Weidmann – with a rigid view of inflation – did not have a chance of finding a majority in the Governing Council, the all-important body for monetary policy.

However, when Nagel was inaugurated on Tuesday, he immediately went to Camp Hawks. They are advocates of strict monetary policy. Their basic thesis that the ECB’s zero-interest rate policy is also fueling inflation is increasing increasingly. In simpler terms: very low interest rates allow government assistance and economic stimulus programs that lead to increased demand and thus prices, which mainly affects people on a tight budget.

On the other hand, the Omikron variant is raging unexpectedly in Europe. There is a risk that if monetary restrictions are tightened too quickly, the economy will collapse. It will take a lot of skill over the next few months to find the right balance. Also communicative. Nails are required. Part of his job is to make German citizens understand what the European Central Bank intends to do.

Isabel Schnabel, a member of the Board of Directors, recently took on this task in a moderate position. If Nagel wants to embody this convincingly, he has to do more than speak on behalf of the domestic financial sector, which has been criticizing supposedly “too low” interest rates for years, because it makes it difficult for them to make money.

So far, this has always been linked to the fact that savers are being “confiscated” and without noting that the ECB has saved millions of jobs with its strategy. A divergent analysis of monetary policy can certainly be expected from the guarantors.