German Inflation Remains High, ECB Not Hitting Target Until 2025: Bundesbank President Nagel

Takeaways

1. Deutsche Bundesbank President warns of excessively high inflation
2. German inflation remains high, ECB target not met until 2025
3. Quantitative tightening acceleration called for by Bundesbank President
4. Nagel believes market can handle swift reduction of ECB’s portfolio

Overview

On Monday, Joachim Nagel, President of the Deutsche Bundesbank, stated that German inflation remains excessively high and that the European Central Bank (ECB) will not achieve its 2% target until 2025.

Nagel further noted that the ECB has ceased purchasing government bonds and is cautiously decreasing its securities holdings by €15 billion per month.

Given the ECB’s current bond portfolio of approximately €5 trillion, Nagel advocated for an acceleration of quantitative tightening, which he believes the markets can handle.

Nagel argued that swift reduction of the Eurosystem’s balance sheet is necessary from a monetary policy perspective.