ECB’s Nagel: Interest Rates to Stay High as Long as Needed

7 November 2023

By Isabel Teles – FRANKFURT (Econostream) – European Central Bank Governing Council member Joachim Nagel on Tuesday said that the ECB would keep interest rates at a high level for as long as necessary to bring inflation back to its 2% price stability target.

In a speech at the German-British Chamber of Industry & Commerce in London, a text of which was posted to the website of the German Bundesbank, which he heads, Nagel said that the Governing Council ‘will maintain a sufficiently high level of the monetary policy rate for as long as necessary to ensure that inflation returns to 2%.’

He elaborated on a point he had touched on the previous week during a speech in Berlin in which he said that the ECB’s latest decision was ‘correct.’

‘Over the course of just fourteen months, policy rates have gone up by 450bp. At its last meeting in October, the ECB Governing Council opted to stay the course and leave rates unchanged’, he said. 'This appears justified, as we have achieved a reasonable degree of tightening, and inflation pressures have subsided somewhat in the past months.’

However, the ECB’s latest projections forecasted inflation above target, and there was a risk that it could be even higher, he warned.

‘As we know, monetary policy measures take time before their full effect becomes visible’, he said.

It was ‘imperative to remain vigilant’, he said, adding that the ECB’s decisions would continue to follow a data-dependent approach.