The Governing Council of the ECB took decisive action to combat the high levels of inflation and keep inflation expectations anchored. This also has implications for the balance sheets of the euro area central banks, as they reflect the financial burdens created by the extensive monetary policy asset purchases of the past and the subsequent rise in interest rates. In response, the Bundesbank increased its risk provisioning over several years. In 2023, the provision for general risks was released in full to offset the losses. For the 2024 financial year, the Bundesbank is now reporting an accumulated loss for the first time since 1979. Nonetheless, the Bundesbank’s assets are substantial and its balance sheet is sound. And I can assure you that the accumulated loss will not in any way change the Bundesbank’s commitment to doing everything in its power to ensure price stability.
Over the course of last year, it became increasingly clear that headline inflation would return to our medium-term target of 2 % in 2025, even with monetary policy stepping less firmly on the brakes. The Governing Council of the ECB therefore lowered the guiding key interest rate by a total of one percentage point in four steps from June to the end of the year.
2024 was not a good year for the German economy. It has been treading water ever since Russia’s war of aggression against Ukraine began in February 2022. And it is becoming increasingly apparent that, alongside cyclical factors, the period of weakness in the German economy also has significant structural causes. Higher energy prices, growing competition on global markets and demographic change are putting pressure on Germany to adapt. It must also successfully navigate the transition to a carbon-neutral economy and the digital transformation, and seize the opportunities that they offer.
Unleashing growth forces is particularly crucial in Germany now. It is also a vital task throughout Europe: we are all facing challenges together and we will overcome them best by working together. Faced with growing geopolitical tensions, we need more Europe in pivotal areas. This includes continuing to break down barriers in our European single market and creating a Savings and Investments Union. A digital euro would also help to strengthen European sovereignty and spark further innovation. In 2024, the Bundesbank continued to work intensively with its partners on the possible introduction of a digital euro.
The Executive Board has now also begun working together in its new composition. With the appointment of Dr Fritzi Köhler-Geib, Lutz Lienenkämper and Michael Theurer, the Board is now finally back to its full complement of six members. In addition, Dr Sabine Mauderer was appointed First Deputy Governor in September 2024.
On behalf of the entire Executive Board, it is my great pleasure to warmly thank all of the Bundesbank’s staff for their hard work and dedication. In 2025, we will continue to work together to ensure that the changes initiated to achieve a more innovative, more agile and increasingly digitalised Bundesbank are a success, so that we can continue to optimally fulfil our stability mandate going forward.
Dr Joachim Nagel President of the Deutsche Bundesbank
