Bundesbank Sees Progress in Price Stability
On April 23, 2025, Bundesbank President Joachim Nagel expressed optimism about price stability in Europe. He predicted that the European Central Bank (ECB) could reach its inflation target of around two percent this year. The current inflation rate stood at 2.2 percent in March, close to this target value. Nagel praised the work of the ECB over the past two years and considers the path taken to be promising.
Economic Risks and the US Bond Market
Although the outlook for price stability is optimistic, Nagel warned of economic risks. He does not rule out a slight recession for Germany, as the global economic situation is overall delicate. He expressed particular concern over the unrest in the US bond market, where doubts about the stability of US Treasury bonds as a “safe haven” have recently arisen.
Nagel emphasized that these uncertainties are not good news for global financial markets and must be overcome, as the stability of the US Treasury bond market is essential for the global financial system.
Independence of Central Banks and Political Influences
Nagel underscored the importance of central bank independence to maintain trust in monetary policy. He criticized political interference, particularly the attacks by former US President Donald Trump on Fed Chair Jerome Powell, which led to market turmoil.
Relevance for Investors
For investors, these developments are significant: the perspective of soon achieving price stability could facilitate interest rate cuts or at least a stabilization in interest rate trends. However, caution is also advised concerning potential recessions and uncertainties in the bond market. These factors can strongly influence inflation expectations and yields. Investors should therefore keep a close eye on inflation developments as well as geopolitical and market-related risks.