Bundesbank President Joachim Nagel has come out in favour of further significant interest rate steps. Speaking at a joint press conference with Federal Finance Minister Christian Lindner ahead of the Annual Meeting of the International Monetary Fund (IMF), Dr Nagel said that the latest inflation data argue in favour of the Eurosystem taking a further “robust” interest rate step at its next monetary policy meeting.

Speaking ahead of the Annual Meeting of the International Monetary Fund (IMF), Bundesbank Vice-President Claudia Buch said that developments in the global economy had reached a turning point. “Cyclical risks and high inflation are weighing on markets, while geopolitical developments and combating climate change require structural adjustments,” Ms Buch explained. The IMF governors of all member states will gather for the Annual Meeting of the IMF and the World Bank, which is to take place in Washington DC in mid-October.

“Interest rates need to rise further, and significantly at that,” Bundesbank President Joachim Nagel has said in an interview with the German newspaper “Süddeutsche Zeitung”. Interest rate hikes can have a dampening effect on economic developments in the short run, he explained, “but by raising rates we are safeguarding price stability in the medium term and preventing our growth potential from being damaged by inflation. After all, persistently high inflation is the biggest drag on growth.”

Speaking at the Bundesbank’s Payments Symposium, Bundesbank President Joachim Nagel and Bundesbank Executive Board member Burkhard Balz have made the case for the Eurosystem pushing forward with its investigations into central bank digital currency. Both used their speeches as an opportunity to emphasise the benefits that a digital euro could bring. 
 

According to the most recent issue of the Bundesbank’s Monthly Report, German credit institutions recorded a strong improvement in performance in 2021 compared with the year before. Profit for the financial year before tax was up €12.8 billion, hitting almost double the previous year’s figure at €27.1 billion – a development which the report primarily attributes to the fact that banks significantly scaled back their risk provisioning compared with 2020 and also released some of the risk provisions that they had formed that year. However, the current year could see the profitability of German banks dampened, in particular, by the repercussions of the Russian war of aggression on Ukraine. The report explains that this might increasingly impair economic growth, which would increase the likelihood of credit losses.

The Bundesbank’s experts see mounting signs of the German economy sliding into a recession. According to the current issue of the Bundesbank’s Monthly Report, economic output is likely to decline somewhat in the current quarter and to shrink significantly in the final quarter of 2022 and the first quarter of 2023. The economists put this largely down to the extremely tight energy supply situation.

Visitors braved the wet autumn weather to flock to the Bundesbank’s offices in the Frankfurt city centre, where the Bank opened its doors to the general public this weekend. The two-day event, entitled “Backstage Bundesbank”, offered a variety of activities for visitors, including a discovery tour around the Bank’s Regional Office in Frankfurt, along with the chance to lift a gold bar, attend a variety of topical talks and meet Bundesbank President Joachim Nagel in person.

To mark the twentieth anniversary of the introduction of euro banknotes and coins in 2002, Executive Board member Johannes Beermann has published a collection of writings for the Bundesbank entitled “The euro at 20: The future of our money”.

This year’s Carl Menger Prize for Economics has been awarded to economist Ricardo Reis. A lecturer and researcher at the London School of Economics and Political Science, Ricardo Reis ranks among Europe’s most respected macroeconomists. The Carl Menger Prize has been jointly awarded by the Deutsche Bundesbank, the Oesterreichische Nationalbank and the Swiss National Bank since 2014.

Economic output in Germany stagnated in the second quarter of 2022. Although the services providers which had been constrained during the pandemic received a boost, high price increases and uncertainty in connection with the war in Ukraine weighed on households and enterprises, according to the Bundesbank’s latest Monthly Report. In addition, the unfavourable developments on the gas market are clouding the future outlook and, according to the Bundesbank, are increasing the likelihood of a decline in gross domestic product in the fourth quarter of 2022 and the first quarter of 2023.