ECB Brief: Nagel Called it ‘Much Too Early to Think About a Pause’, Meaning Today, Not 14 September

25 August 2023

By David Barwick – FRANKFURT (Econostream) – It is too easy - and probably wrong - to think that European Central Bank Governing Council member Joachim Nagel could only have been calling for another hike of interest rates in the interview published on Friday.


Nagel, who heads the German Bundesbank, told Bloomberg, ‘I think it's, for me, much too early to think about a pause.’


Viewed in the context of Nagel’s well-established hawkishness, the most convenient but deceptive interpretation is that he regards a pause in September as premature and favours yet higher borrowing costs.


We would urge considering his very next remarks: ‘I think we have to wait for the next numbers’, he continued. ‘So, we agreed in our July meeting in the Governing Council that we will wait for the numbers we will see in our September meeting, and I will more or less follow this path. I will wait for the September numbers and then we will see.’


We are confident that his assessment of it being ‘much too early to think about a pause’ was not intended to express a preference for the outcome of the 14 September meeting of the Governing Council.


Rather, consistent with the sentiment he then expressed, he simply meant that as of 25 August CET (24 August locally, the interview having taken place at Jackson Hole), it was too soon to say whether the ECB should pause next month.


The interpretation that he was merely sticking to the ECB’s data-driven, meeting-by-meeting approach is amply reinforced by his repeated insistence over the course of a relatively short interview on the need to collect all possible data before deciding:


  • ‘[W]e should wait for the September numbers and then we will decide in the Governing Council what is necessary to do.’
  • ‘I see that also for our September meeting that we will check … what are the data is telling us. And so, this is what I'm waiting for.’
  • ‘[W]e have to wait for the September data and then we will draw out of that … the right decisions.’
  • ‘We should wait for the inflation data for, for August and for our forecast we are doing for the next months.’


To be sure, Nagel remains a policy hawk. He did not fail to note that core inflation remained sticky, repeated his call for monetary policy to be ‘even more stubborn than inflation’ and observed yet again that current euro area inflation was still ‘much too high’.


At the same time, he situated increasing economic weakness in the context of tighter monetary policy, acknowledged slower headline inflation and voiced the expectation that most of the effects of higher interest rates would only be seen next year.


All in all, we would thus consider Nagel to have been quite restrained, indeed perhaps marginally more so than in his most recent previous comments of almost one month earlier.