A Member of the Governing Council of the European Central Bank (ECB), Joachim Nagel has warned that damaging public trust in statistics and central banks could result in negative economic consequences.
According to him, independent and trustworthy statistics are crucial particularly for central banks, referring to them as “the backbone of sound monetary policy.”
This comes as Nagel said that Europe must stop acting timidly in its trade relationship with China and start defending its own economic interests “in a more offensive way” during a financial gathering in Washington,
Nagel said, “China needs Europe more than Europe needs China. We are a strong economy. We are four hundred fifty million people… So we should play the European card in a more offensive way.” According to the economist the continent should not rely on others to protect its markets. “The most important market for the European is Europe itself,” the ECB member said.
As earlier reported by Cryptopolitan, Trump’s on-and-off-again tariffs on China this year have led to a new wave of retaliation from Beijing, forcing Chinese exporters to redirect goods to markets such as Europe, where they are often sold under local production costs.
Nagel points out the risks associated with central banks failing to function independently
Nagel noted that trustworthy statistics were facing challenges lately. This happens when elected officials begin to openly question the reliability of key economic data that does not match the government’s view.
Following these claims, the ECB member acknowledged that such allegations are powerful and replacing individuals who share unwanted information brings about even greater consequences.
His remarks were made at an event in New York, following US president Donald Trump’s dismissal of the Bureau of Labor Statistics commissioner due to disappointing job numbers and significant changes to previous data.
Moreover, reports from sources highlighted that Trump frequently criticized Federal Reserve Chair Jerome Powell and tried to get rid of Fed Governor Lisa Cook. Regarding this report, Nagel cautioned against making decisions about monetary policy based on “political convenience” instead of careful economic analysis.
He also mentioned that history clearly illustrates risks such as loss of public trust, financial chaos, and rampant inflation when central banks fail to function independently.
Nagel expresses satisfaction with the ECB’s current monetary policy
When the ECB developed their current monetary policy, Nagel expressed his satisfaction with the decision. He stated that he believed there was no need to make adjustments unless new data indicate a shift in the economic outlook.
Regarding the situation, the president of the Bundesbank pointed out that he was very confident that the central bank is closing to its 2% price target. He added that he was not too worried about the bank missing this goal for a long time.
“I feel quite comfortable with our current position,” Nagel stated during the IMF’s annual meetings in Washington. He further highlighted that if new information comes in that changes his view, then he will be open to adjusting his thoughts. However, for now, Nagel mentioned that he thinks they are in a good spot.
Meanwhile, with inflation nearing the target and the economy proving resilience against challenges such as trade-related problems and wars, most policy makers are comfortable with current interest rates.
Earlier this month, investors and economists anticipated that it is unlikely there will be another rate cut this year, despite eight cuts already in this cycle. This prediction was made after Nagel remarked that it would require a lot to shift his view that the ECB’s approach is suitable.
On the other hand, some policy makers, such as Francois Villeroy de Galhau of France, have suggested that the bank should not rule out further cuts. They think the risks to growth and inflation are still greater.
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Source: https://www.cryptopolitan.com/ecb-warns-on-undermining-trust-in-statistics/
