ECB’s Nagel: Interest Rates Must Remain High for as Long as Necessary

31 October 2023

By Isabel Teles – FRANKFURT (Econostream) – European Central Bank Governing Council member Joachim Nagel on Tuesday said that the ECB’s tight monetary policy was effective and that interest rates had to be kept high for long enough.

In a speech in Berlin, a text of which was posted to the website of the German Bundesbank, which he heads, Nagel said that ‘[o]ur tight monetary policy is working, but we must not let up too soon. Rather, the key interest rates will have to remain at a sufficiently high level for a sufficiently long time.’ 

The ECB’s decision last week to keep interest rates unchanged for the first time since July 2022 was right, he said.

‘Given the current inflation outlook and the tightening of monetary policy that has already been achieved, I believe this [decision] is correct’, he said.

There were still upside risks to inflation, such as the impact that the tensions in the Middle East could have on energy prices, that ‘make the medium-term outlook more uncertain.’

Price stability was a top priority, he said, and [the ECB’s 'monetary policy stance must ensure that inflation returns to 2%.’

‘I will do everything in my power to ensure that high inflation is soon behind us’, he said. ‘Ensuring stable money is the best contribution that monetary policy can make to prosperity for all.’