(Bloomberg) — Bundesbank Bank President Joachim Nagel signaled he’d be in favor of raising reserve requirements after the European Central Bank stopped paying interest on them.
(Bloomberg) — Bundesbank Bank President Joachim Nagel signaled he’d be in favor of raising reserve requirements after the European Central Bank stopped paying interest on them.
“We should be open to do more,” he said on Monday in Frankfurt. “The financial system shouldn’t take for granted that this is the end of what we have to do in the Governing Council, how to really tackle this excess liquidity story.”
The ECB took banks by surprise in July with a decision to offer zero interest on money that they are required to park with it as minimum reserves, instead of the 3.25% it previously paid out. The action will become effective on Sept. 20.
“This first decision was an important one, it gave the right direction,” Nagel said, cautioning that “this is maybe not the end of the story.”
The German central banker steered clear of monetary policy in his remarks, beyond stating that inflation is still much too high — and that’s what officials are focusing on rather than giving out subsidies to lenders.
“Our mandate in the Governing Council is crystal clear, this is price stability,” he said. “It’s not our — let me say — intention when we discuss those things to make the banks happy. This is definitely not the case.”
Nagel also said that the Bundesbank might return to profit in 2028 or 2029.
–With assistance from Jana Randow.
(Updates with Nagel comments in second paragraph)
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