ECB Still Has More Ground to Cover, Might Hike in September, Nagel Says

16 June 2023

By Xavier D’Arcy – FRANKFURT (Econostream) – The European Central Bank still has ground to cover and may need to continue raising rates beyond July, Governing Council member Joachim Nagel said on Friday.

In a speech at the 89th Plenary meeting of the Group of Thirty in Amsterdam, Nagel, who heads the German Bundesbank, said the ECB would continue its efforts to combat high inflation and still had a long way to go before reaching its target of 2% inflation in the medium-term.

‘As I see it, we still have more ground to cover. We may need to keep raising rates after the summer break’, he said.

On the inflation outlook, he noted that ‘despite current inflation rates that are significantly down on their peaks in October, we still have a long way to go to reach our inflation target.’

‘Moreover, inflation uncertainty remains high’, he added. ‘The ECB Governing Council will continue in its efforts to combat high inflation.’

Once the ECB had reached the peak of its tightening cycle, it would ‘stay there until we are sure of a safe and timely return of inflation to our 2% target’, he said.

The ECB needed to ‘support this interest rate policy by reducing our balance sheet’, he said, adding that ‘I very much welcome the decisions to increase the pace of this reduction.’