Inflation Hawk to Lead German Bundesbank

“Federal Chancellor @OlafScholz and I propose Joachim Nagel as the new President of @bundesbank,” German Finance Minister

Christian Lindner

wrote Monday on Twitter.

The appointment of Mr. Nagel brings in a former adviser to Chancellor Olaf Scholz’s Social Democratic Party as the leading voice of German monetary policy. Mr. Nagel is a Social Democrat Party member who previously advised the party’s executive committee. Mr. Weidmann had previously worked as an economic adviser to former Chancellor

Angela Merkel,

a member of the conservative Christian Democratic Party, before taking the top job at the Bundesbank in 2011.

The move suggests continuity in the Bundesbank’s policies, although economists said it is unlikely to substantially alter the direction of ECB monetary policy, since Mr. Weidmann’s hawkish stance was already in a minority at the bank.

“Joachim Nagel has so far been known as a supporter of a stability-focused approach to monetary policy. If he sticks to this position in the council of the European Central Bank, he will be one of those who advance the counterarguments against the current ultra-expansionary monetary policy,” said Stefan Kooths, vice president of the German IfW economic institute.

Jan Holthusen, head of the research department at DZ Bank, said in a note that Mr. Nagel would bring constructive criticism to the ECB.

Inflation is once again a headline topic in Germany, where it reached 5.2% in November, uncomfortably high for a nation with deep-seated historical fears of rising prices.

“In view of the risk of inflation, the importance of a stability-oriented monetary policy is growing,” Mr. Lindner wrote. Mr. Nagel “is an experienced personality who ensures the continuity of the #Bundesbank.”

As Germany’s top central banker, Mr. Nagel will have a strong chance of succeeding ECB President

Christine Lagarde

when her term ends in 2027. The ECB was modeled on the Bundesbank and is based in the same German city, Frankfurt, yet has never been led by a German, even though the country is the region’s largest economy.

Mr. Nagel, 55, was a Bundesbank board member between 2010 and 2016, and previously ran the central bank’s markets department. He is currently deputy head of the banking division at the Bank for International Settlements, a Switzerland-based bank for central banks.

Since leaving the Bundesbank in 2016, Mr. Nagel worked for the state-owned bank KfW and as a board member of the German stock-exchange group

Deutsche Boerse AG

.

The ECB said last week it would phase out an emergency bond-buying program while increasing other stimulus measures and holding interest rates below zero, aiming to keep the 19-nation eurozone’s recovery on track despite record-high inflation. The ECB’s cautious approach contrasts with that of the Fed, which said last week it would accelerate the wind-down of its bond-buying program and signaled three interest-rate increases next year.

Eurozone inflation rose to 4.9% in November, the highest rate since the euro was launched in 1999 and more than double the ECB’s 2% target.

Mr. Weidmann was the latest in a string of German central bankers to resign before their term has ended, often following policy disputes.

The ECB’s recent stimulus policies have provoked anger in Germany, where many savers park their money in fixed-interest products whose returns plummeted. They also made it a lot harder for banks and insurance companies there to make profits and rekindled old fears about inflation undermining the stability of the euro. Mr. Weidmann led the opposition to Mr. Draghi.

Write to Tom Fairless at [email protected]