TIGHTEN POLICY NOW, BUNDESBANK CHIEF SAYS

Europe’s central banks need to stop economic stimulus programs now, begin a “normalization” of monetary policies, and tighten the European Union’s (EU’s) fiscal rules to ensure they are being adhered to, Joachim Nagel, the new head Germany’s Bundesbank central bank, said in an interview last week with the Die Zeit newspaper.
“The economy is recovering,” he said. “The job markets are looking good. That is why monetary policy can become less expansive.”
When the European Central Bank’s (ECB’s) governing committee meets on 10 March, Nagel will call on it “to end net bond purchases in 2022,” he said, “then interest rates could rise this year.”
Also, “when we put this [COVID] crisis behind us, it will be time to reduce high government debt ratios and rebuild buffers,” he added.
Last week, Nagel added his voice to that of other ECB committee members calling for more immediate action than the committee as a whole has chosen to adopt.
In recent press comments, ECB president Christine Lagarde refused to reiterate her long-standing insistence that the bank would not raise rates this year, as we noted in “ECB About Face: Interest Rate Hikes” (8 Feb 2022).
The bank could stop net bond purchases and lift its key interest rate to zero this year from the -0.50 percent where it has been since 2014, analysts told the Financial Times.
Nagel also called on the EU to enact tougher rules that would “better ensure that high government debt ratios are reduced.”
Nagel’s comment takes an opposite view from the central banks of France and Italy, which want looser rules to allow greater government investment in national economies.
The rules are due to be renegotiated next year.
TRENDPOST: The Bundesbank has always been skeptical of negative interest rates and central banks’ bond-buying sprees. And, they have noted repeatedly that the zero and negative rates hurt the average public, since they get no interest on the extra cash they have while benefiting the “Bigs” who borrow cheaply… and keep growing bigger with record levels of mergers and acquisitions.