European Central Bank: The world economy is in a very delicate situation – Joachim Nagel

In an interview with Bloomberg on Tuesday, the policy head of the European Central Bank (ECB) and president of Bundesbank, Joachim Nagel, said the world economy is in a very delicate situation and said they need to have a better understanding of how to find tariff commitments.

Key conclusions

“Tariffs are not a good policy, that’s safe.”

“In the Euro system we are on a good way.”

“There is a lot of uncertainty, we have to be cautious.”

“I see many good news when it comes to inflation.”

“It is too early to reach a final conclusion about what the tariff scenario means for both sides of the Atlantic.”

“The role of Germany does not change with the new financial package.”

“The package is an important message to the world that Germany is doing its homework.”

“It is not good to doubt the position of the US dollar as a safe refuge.”

“We should return to the US Treasury. The status of safe refuge.”

“The independence of central banks is the DNA of a good central bank.”

“You can’t exclude turbulence if central banks lose independence.”

“Europe has to stay together in these complicated times.”

“I trust that the ECB rates will go back to 2% this year.”

Market reaction

The EUR/USD did not show an immediate reaction to these comments and was marginally quoting down in the day to 1,1410.

BCE FAQS


The European Central Bank (ECB), based in Frankfurt (Germany), is the euro zone reserve bank. The ECB sets interest rates and manages the monetary policy of the region.
The main mandate of the ECB is to maintain prices stability, which means maintaining inflation around 2%. Its main tool to achieve this is to raise or lower interest rates. Relatively high interest rates often translate into a stronger euro, and vice versa.
The BCE Governing Council adopts monetary policy decisions in meetings that are held eight times a year. The decisions are adopted by the directors of the national banks of the euro zone and six permanent members, including the president of the ECB, Christine Lagarde.


In extreme situations, the European Central Bank can launch a political tool called Quantitative Easing (quantitative relaxation). The QE is the process by which the ECB prints euros and uses them to buy assets (normally state or business bonds) to banks and other financial institutions. The result is usually a weaker euro ..
The QE is a last resort when it is unlikely that a simple decrease in interest rates achieves the price stability objective. The ECB used it during the great financial crisis of 2009-11, in 2015 when inflation remained stubbornly low, as well as during the Coronavirus pandemic.


The quantitative hardening (QT) is the reverse of the QE. It is carried out after the QE, when economic recovery is underway and inflation begins to increase. While in the QE the European Central Bank (ECB) buys state and business bonds from financial institutions to provide them liquidity, in the QT the ECB stops buying more bonds and stops reinvesting the main one that overcomes the bonds it already has. It is usually positive (or bullish) for the euro.

Source: Fx Street

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