ECB Must Be Much More Persistent; Far From Done With Rate Hikes, Nagel Says

16 February 2023

By Xavier D’Arcy – BERLIN (Econostream) – The European Central Bank should remain persistent in tackling high inflation, as the effort to restore price stability is far from being finished, Governing Council member Joachim Nagel said on Thursday.

In the discussion following a lecture he delivered for the German Institute for Economic Research, Nagel, president of the Deutsche Bundesbank, said that ‘in a situation like this, we have to be much more persistent in monetary policy in order to get a grip on inflation.’

‘I have already pointed out in various places that our work is far from done, there is still a long way to go’, he said. ‘We know from past episodes that it was always a cardinal mistake to let up too early on the part of monetary policy in such a phase; in my view, this mistake should not be repeated.’

He said that he was ‘completely behind what Ms Lagarde indicated for the March meeting - a clear, robust interest rate step must certainly follow.’

It was unlikely that the ECB would be finished hiking in March, he said: ‘From today's perspective, I don't see inflation rates, especially core inflation rates, declining so much that this path would already be over after March; there will still be a lot to do.’

Headline and core inflation rates in both Germany and the Eurozone ‘speak for themselves’, he said. The numbers ‘really only speak one language, and that is that we have to try to counteract this through interest rate policy.’

Key interest rates were not yet in restrictive territory, in his opinion: ‘From today's perspective, I don't see that we are in restrictive territory. I can't tell you yet where restrictive territory will be. That will clearly depend on how the new projection figures look and how we come into the next meeting.’