Germany Picks Bundesbank Veteran Nagel as Central Bank Chief

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Germany’s new coalition government picked Joachim Nagel, a former Bundesbank senior official, as the central bank’s next chief, touting his ability to help tackle soaring inflation.

Nagel, 55, will succeed Jens Weidmann, who leaves at the end of the year. The choice of a veteran for the top job suggests there’ll be no major shift in stance at an institution hallowed within Germany for its role in reasserting price stability during the second half of the 20th century.

“Considering the risk of inflation, stability-oriented monetary policy is of increasing significance,” Finance Minister Christian Lindner said Monday in a tweet. “This is an experienced personality who will ensure continuity at the Bundesbank.”

What Bloomberg Economics Says...

“The choice of Joachim Nagel as head of Germany’s central bank suggests a continuity in policy. His career history and public statements imply his views will be similar to the hawkish sentiments of his predecessor, Jens Weidmann. Nagel’s nomination is unlikely to materially alter the balance of views on the European Central Bank’s Governing Council.”

-- David Powell, senior economist. Read full REACT here. 

An economist seen as close to Chancellor Olaf Scholz’s Social Democrats, Nagel served six years on the Bundesbank’s board before moving to state-owned development bank KfW Bank. He’s currently deputy head of the banking department at the Bank for International Settlements.

Nagel is rejoining Germany’s central bank at a critical time. A new government has taken office after months of political vacuum, inflation has just hit 6% and a new wave of coronavirus infections is threatening the economy.

That backdrop has put both Scholz and Finance Minister Christian Lindner of the Free Democrats in the spotlight. Lindner has repeatedly expressed concern at inflation and also says he’s wary at the possibility of fiscal dominance in the euro area. 

European Central Bank President Christine Lagarde welcomed Nagel’s nomination and lauded his experience in monetary policy. 

His nomination fits Germany’s role as Europe’s anchor of stability, Deutsche Bank chief Christian Sewing said in his capacity as president of the Association of German Banks.

Economists at German think-tanks see Nagel defending the Bundesbank’s traditions without becoming ideologically fixated in ECB Governing Council debates. Stefan Kooths, vice president of the Kiel Institute for the world economy, argues that those advocating looser monetary policy should even be accommodated by this choice.

“He’s damping expectations that inflation will overshoot the target in the medium term,” Kooths said in an emailed statement. “Proponents of a loose policy can therefore be rather relaxed about the new Bundesbank leadership, as they will actually gain more leeway for their course in the short term.”

The nomination of Nagel means Germany will miss an opportunity to pick its first-ever female central bank chief, despite potential candidates ranging from Isabel Schnabel, a top ECB policy maker, to the current Bundesbank vice president, Claudia Buch.

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