Rates Need To Keep Rising, Uncertain by How Much, ECB’s Nagel Says

5 July 2023

By Xavier D’Arcy – FRANKFURT (Econostream) – European Central Bank Governing Council member Joachim Nagel said on Wednesday that rate hikes were likely to continue, but that the exact amount of tightening left was uncertain.

Speaking at a conference in Frankfurt, Nagel, who heads the German Bundesbank, said the ECB had ‘not yet reached the end of the tightening path. From today's point of view, interest rates need to continue to rise. However, the question of how much further interest rates need to rise cannot be answered at this time.’

‘We also cannot say how long they will remain high and how they will develop thereafter. That depends on the inflationary environment, which is highly uncertain’, he said.

Monetary policymakers had learned from past episodes of high inflation the ‘important lessons’ of ‘not allowing inflation expectations to become unanchored, not responding to monetary policy too weakly, and not easing too early.’

In the longer term, ‘geopolitical fragmentation, and thus also geo-economic fragmentation, could also sustainably lead to increased price pressure’, he said.