It is an extraordinary change at the top of the Deutsche Bundesbank, which was celebrated with a ceremony on Tuesday: In the middle of a phase with high inflation and a hesitant European Central Bank (ECB), Jens Weidmann stops prematurely and gives little to the general public well-known Joachim Nagel from the Bank for International Settlements.

Even ECB President Christine Lagarde said at the ceremony that she couldn't say much about Nagel, she didn't know him enough for that.

For the first time in the history of the institution, the handover took place as an online event - an expression of the extraordinary situation in which the Bundesbank is also in the pandemic.

Christian Siedenbiedel

Editor in business.

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After all, the new President of the Bundesbank emphatically assured him that he would continue the stability-oriented monetary policy of his predecessor.

After all, he sees the danger "that the inflation rate could remain elevated for longer than currently expected".

It is true that the current inflation rates are also due to special effects in connection with the pandemic, which expired automatically - but not only, emphasized Nagel.

The medium-term price outlook is also "extraordinarily uncertain".

"At the moment I see the risk that the inflation rate could stay high longer than currently expected."

More digitization and diversity

The new President of the Bundesbank is thus positioned in the field of tension between economists between the "#TeamTransitory", as it is called on the Twitter news service, which considers the higher inflation to be a temporary phenomenon, and the "#TeamPermanent", which expects higher rates in the longer term, apparently similar to Weidmann in a kind of diplomatic admonishing middle position.

"Despite all the uncertainty, one thing is very clear," said Nagel: "If price stability requires it, the Governing Council must act and adjust its monetary policy course." After all, inflation has not only economic but also social costs: "People with low incomes are hit harder because they spend a larger part of their income on consumption. "

The central banks should therefore maintain their independence and interpret their mandate narrowly, said Nagel.

At the same time, the Bundesbank must be “a modern, efficient institution that accepts the challenges of change”.

Among other things, Nagel announced that he wanted to advance the topics of digitization and diversity in the Bundesbank.

Combating climate change is also an important goal - even if governments and parliaments have to make the main decisions.

Bundesbank Vice President Claudia Buch called the departing Weidmann “the face of the Bundesbank”: “An era is coming to an end,” she said.

Lutz Supplitt from the staff council of the Bundesbank emphasized that Weidmann was also very popular with the employees: "There is no better way to fill the role."

The new Finance Minister Christian Lindner (FDP) also praised the outgoing Bundesbank President - combined with serious words to his successor. Many people watched the high inflation rates with concern. The federal government has confidence in the ability of the ECB and the Bundesbank to act. Lindner addressed a possible conflict that has recently emerged in the leadership of the ECB. While ECB chief economist Philip Lane reiterated the previous line of the central bank in an interview with an Italian newspaper, according to which inflation will soon fall again, ECB board member Isabel Schnabel at least brought up the possibility of higher inflation rates in the medium term in connection with climate policy . Lindner said:"We as the Federal Government are observing this debate and believe that sensitivity on this issue is right."

ECB President Christine Lagarde was cautious about the fundamental issues.

"We understand that many people are concerned about rising prices, and we take these concerns very seriously," she said.

But people could be sure that the ECB will "unshakably" adhere to its price stability target.

Lagarde said that despite all the controversy, she really appreciated working with Weidmann.

You will miss him.

Weidmann embodied the best of the Bundesbank's tradition, namely “loyalty to the mandate”.

"The uncertainty remains high"

Weidmann thanked Lagarde for the cooperation - but was quite critical of monetary policy. This has played a stabilizing role in the crises of the past few years, but has "never completely got out of the crisis mode". The permanent state of emergency has left its mark: "The coordinate system has shifted." It was possible to develop a strategy during the pandemic. The practical test is still pending. After all, inflation has climbed to the highest levels since the establishment of the monetary union. The rates are likely to decline again this year: “The uncertainty remains high as to whether they will drop below 2 percent in the future or whether they will solidify.” It is important tothat the central bank is now pursuing its goal of monetary stability without compromising - especially without considering the financing costs of the states.

In parting, Weidmann quoted an old role description by Harvard economist Robert Barro for an ideal central banker for his successor.

"He should always appear gloomy in public, never tell jokes and constantly complain about the dangers of inflation." But he really did not stick to it, said Weidmann and concluded with: "Goodbye".