Bundesbank Board Member Mauderer: Not All ‘Doom and Gloom’; Weak Euro a ‘Buffer’ for Germany

18 January 2023

By Xavier D’Arcy – FRANKFURT (Econostream) – Deutsche Bundesbank board member Sabine Mauderer said on Wednesday that despite pessimistic business expectations and elevated inflation, it was not all ‘doom and gloom’ for the German economy.

In a speech before a German business and lobby association in Berlin, Mauderer said that in all likelihood, further interest rate hikes would follow last year's sharp policy tightening by the European Central Bank.

Although currently ‘far too high’ inflation levels were expected to continue to fall over the course of 2023, price growth would remain at a level that is ‘clearly too high’ this year, she said. Price pressures should recede further towards the ECB’s goal of 2% over the course of 2024 and 2025, she predicted.

High energy prices were continuing to make life difficult for many German firms, she said, though it was not all ‘doom and gloom’, as many businesses had begun to reduce their dependency on gas. In further good news for the German private sector, the depreciation of the euro against the US dollar had provided ‘a temporary buffer for Germany's price competitiveness’, she said.

The European single currency’s fall in value has been linked by many observers to the ECB’s slower rate hike cycle compared to the US Federal Reserve. It has also been cited as a contributing factor to currently high inflation in the Eurozone.

In her speech, which focused mainly on energy and climate policies, Mauderer said that an ‘orderly phase-out of oil and gas by means of a transparent, step-by-step plan’ should help stabilise prices in Germany, where inflation fell slightly to 9.6% in December. She said that the energy transition could not and should not be funded by the state alone; the financial sector ‘must provide much of the funding.’