ECB’s Nagel: Very High Core Inflation Still a Worry

5 October 2023

By Isabel Teles – FRANKFURT (Econostream) – European Central Bank Governing Council member Joachim Nagel on Thursday said he was concerned about still-elevated core inflation.

In a speech at the Karlsruhe Institute of Technology in Germany, the text of which was posted on the website of the German Bundesbank, which he heads, Nagel said that monetary policy should remain restrictive until the inflation target was reached. 

‘What is worrying is the still very high core rate, which excludes energy and food prices, which are susceptible to fluctuations', he said. 'It gives a revealing picture of the underlying inflation trend, and it is obviously not yet broken.’

‘We in the Governing Council need to continue our restrictive stance until it is ensured that inflation returns to our medium-term target of 2%’, he said.

In the absence of a common fiscal policy in Europe, it was 'all the more important for the stability of the common currency that the state finances are sound', he said. 'And that the common fiscal rules are taken seriously, adhered to and enforced.'

The shortage of skilled workers was 'increasingly becoming a brake on growth', he warned.

'Incidentally, the labour shortage can also have an impact on the Eurosystem’s monetary policy', he said. 'Because it gives the employee side greater bargaining power in wage negotiations.'

'If this results in additional inflationary pressure, monetary policy would have to respond', he added.