ECB Should Step Up Quantitative Tightening Pace, Nagel Says
27 March 2023
By Xavier D’Arcy – FRANKFURT (Econostream) – European Central Bank Governing Council member Joachim Nagel said on Monday that it was necessary to reduce the ECB’s bond holdings more quickly.
Speaking at the 100th anniversary of the Baden Municipal Insurance Association in Karlsruhe, Germany, Nagel, who heads the German Bundesbank, said the ECB would continue to move decisively and show persistence until inflation was defeated.
Regarding the ECB’s reduction of its balance sheet, he said that ‘[f]rom summer onwards, I think it can accelerate. The markets can cope well with that.’
He said he thought that, ‘from a monetary policy point of view, it is necessary to reduce the size of the Eurosystem's balance sheet more quickly.’
Inflation rates were ‘far too high’ in the Eurozone and the ECB would ‘continue to move decisively along the path of monetary policy normalisation until we have captured inflation and price stability is restored’, he said. Fighting inflation required ‘perseverance and consistency’, he said. He promised to do his ‘utmost’ to achieve price stability.
Financial turbulence had made it ‘more important that we decide on further monetary policy steps from meeting to meeting’, he said. Policymakers were ‘keeping a close eye on developments in the financial markets and stand ready to act should the need arise.’
The ECB believed that ‘inflation has now passed its peak’, he said, though it would ‘only decline slowly in the coming months.’
Next year, the inflation rate would ‘probably still be well above the 2% mark’, he said.