Bundesbank President Jens Weidmann resigns for personal reasons

Bundesbank President Jens Weidmann announced in a statement that he is leaving the Bundesbank at the end of the year for personal reasons.

Weidmann has led the bank since May 2011: "I have come to the conclusion that more than 10 years is a good time to start a new chapter - for the Bundesbank, but also for me personally." 

Weidmann doesn’t hide his disagreements with his colleagues in the Governing Council of the European Central Bank, referring pointedly to the leadership of Christine Lagarde, though he describes the discussions as “open and constructive in the sometimes difficult discussions of recent years”.  He acknowledges that monetary policy had a stabilizing role during the pandemic, and the successful conclusion of the strategy discussion as an important milestone in European monetary policy. 

Symmetry shouldn’t be one-sided

“A symmetrical, clearer inflation target has been agreed. Side effects and, in particular, financial stability risks should be given greater attention. A deliberate overshooting of the inflation rate was rejected [...] It will be crucial," said Weidmann, "not to look one-sidedly at deflation risks, but also not to lose sight of prospective inflation risks". 

He cautioned against a more broad approach that “gets caught up in fiscal policy or the financial markets: "This remains my firm personal conviction as well as the great importance of the independence of monetary policy."

Weidmann has been sounding the alarm over inflation for some time, in September he said that while most inflation was due to transitory factors there were risks to the price outlook: “In my view, the risks are tilted to the upside right now,” he raised particular concerns that savings accumulated during the pandemic could lead to greater consumption than expected. “And if these transitory factors lead to higher inflation expectations and accelerated wage growth, the rate of inflation could rise perceptibly over the longer term as well.”

Lagarde expresses regret

In a statement President of the European Central Bank Christine Lagarde said: “I respect Jens Weidmann’s decision [...]but I also immensely regret it. Jens is a good personal friend on whose loyalty I could always count. As the Governing Council’s longest serving member he had unparalleled experience that he was always ready to share. 

“In the past two years we built a very strong and productive relationship based on our joint commitment to furthering European unity, fulfilling the ECB’s price stability mandate help the euro area economy through the unprecedented crisis cause by the coronavirus, and stabilizing the global economy shaken by the effects of the pandemic.”

What next?

The incoming traffic light coalition (Social Democrats, Greens and Liberals), who are currently finalizing their coalition agreement, will probably select the next candidate for Bundesbank President. The German federal president will then appoint the candidate who has an eight-year term.

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