Bundesbank Board Member Wuermeling: Need Negative Interest Rates to Restore Price Stability

14 June 2021

By David Barwick – FRANKFURT (Econostream) – German Bundesbank Board member Joachim Wuermeling on Monday defended negative interest rates as appropriate in light of inflation prospects.

In a speech on the German banking sector made available by the Bundesbank, Wuermeling said that ‘negative interest rates are necessary for monetary policy to bring the inflation outlook in the euro area significantly closer to a level that is close to, but below, 2%.’

‘Monetary policy acts independently - also independently of the profitability of the banks’, he added.

Wuermeling conceded that interest rates below zero ‘are a challenge for the lending business.’ Increasing them is however ‘not particularly easy either’, he said.

The pandemic still requires vigilance, also with respect to the possibility of insolvencies, he said.

‘Banks should resist the general euphoria that the pandemic is abating’, he said. ‘For them, the moment of truth may still be yet to come.’