ECB’s Nagel Sees No Change of Course, Says Rates to Rise ‘Sharply’ in February and March
25 January 2023
By Xavier D’Arcy – FRANKFURT (Econostream) – European Central Bank Governing Council member Joachim Nagel cautioned on Wednesday against thinking that inflation had peaked, and confirmed the continued need for interest rate hikes.
In an interview with German newsweekly Der Spiegel, Nagel, who heads the German Bundesbank, said he saw ‘no reason to change anything about the course that ECB President Christine Lagarde outlined.’ The guidance issued by the ECB in December was ‘still correct’, he added.
Lower headline inflation in December should not be given too much weight, he said, and policymakers ‘must be careful not to sing the swan song to high inflation too soon.’
The ECB had announced that interest rates would rise ‘sharply’ in February and March, he reminded. Thereafter, he said, he ‘would not be surprised if we have to raise key interest rates even further’. The ECB’s deposit facility rate was still ‘only’ at 2%, whereas inflation, both headline and core, was ‘still very high’, he said.
Asked when inflation in the Eurozone would return to target, he cited the ECB's December projections, saying that ‘we are likely to be back at 2% in the euro area only during the course of 2025.’
There remained a risk ‘that inflation could be higher than expected’, he said.
Nagel had said last Friday on a panel in France that the ECB would bring inflation back to target ‘at the end of 2024, 2025’.
With respect to the current economic outlook, the euro area economy is ‘proving to be more robust than we thought a few months ago’, he told Der Spiegel.