Bundesbank Executive Board member Sabine Mauderer warns against monetary policy treating financial market signals too cavalierly. “They cannot be taken at face value, but should be treated as the raw material for monetary policy decisions,” she said at a financial market event in Frankfurt. Ms Mauderer pointed out that market indicators which measure growth and inflation expectations have become more multi-layered and that markets have become increasingly more complex at the same time.

It is important, in her opinion, for central bankers to filter out the informational content of market indicators that is relevant for monetary policy. That informational content needs to be qualified, quantified and cross-checked against other information, such as monetary or real economic data. “Inaccurate or incomplete information might lull us into complacency in one situation or drive us to take potentially unnecessary or premature action in another,” she said.

Financial markets need to be greener

In addition, Ms Mauderer also addressed the financial market risks currently being posed by climate change. “Climate risk is also financial risk,” she noted. The task of central bankers, in her opinion, to identify these risks and to support the resilience of the financial system. “We need more and better data and we need a common taxonomy,” Ms Mauderer added, noting that the Bundesbank is also investigating how to better incorporate sustainability criteria into its own portfolio and the portfolios under its management. According to Ms Mauderer, “For us, it’s important that everything we do is market neutral. I hope and expect, though, that financial markets will become greener and more sustainable”.