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Bundesbank President Joachim Nagel: »Our job is price stability«
Photo: Heiko Becker / REUTERS
From the point of view of Bundesbank President Joachim Nagel, possible balance sheet losses must not cause central banks to falter in their fight against high inflation rates.
"Our job is price stability, that's above making profits or avoiding losses," Nagel told the magazine, "Capital" according to Tuesday's report.
Central banks would have to do everything to keep prices stable and curb the current inflation.
"If this results in losses, that must not deter us from our consistent anti-inflation course."
The reason for this is the price increases, especially in the past year.
According to the Federal Statistical Office, consumer prices rose by an average of 7.9 percent, the highest value since reunification.
The ECB and national central banks in the euro zone had already warned in the past few months of balance sheet losses as a result of the rate hikes that have been taken.
In recent years, the monetary watchdogs had acquired massive holdings of government bonds and corporate bonds, which are currently yielding rather low interest rates.
On the other hand, as part of the interest rate turnaround, they now have to pay the commercial banks high interest rates again for their deposits at the central bank.
The deposit rate in the euro zone is currently 2.0 percent – it was still negative in June 2022, which meant penalty interest for commercial banks.
Bundesbank has reserves
Nagel had pointed out that the Bundesbank had made provisions of around 20 billion euros in case interest rates rose again.
He did not rule out losses for the Bundesbank.
That would not be a novelty.
The German central bank was already in the red in the 1970s.
Last year, however, Nagel had ruled out that the state would have to inject capital for the Bundesbank.
For the corona years 2020 and 2021, the Bundesbank check to the federal government did not materialize because the German central bank had only achieved a balanced result.
For 2019, she had transferred a balance sheet profit of almost 5.9 billion euros to the federal budget.
axb/Reuters