ECB’s Nagel: ‘Not Yet Clear Whether This Hiking Cycle Is Now Over’

23 November 2023

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Joachim Nagel on Thursday said that it remained uncertain whether the ECB would have to tighten monetary policy further.

In a speech at an event in Milan posted to the website of the German Bundesbank, which he heads, Nagel reiterated the standard message that interest rates, left where they are for long enough, would help restore price stability.

‘However, it is not yet clear whether this hiking cycle is now over’, he said.

The ECB would remain data-dependent and continue to set policy on the basis of the three known elements, including the inflation outlook, underlying inflation and policy transmission, he said.

The medium-term outlook had become yet more uncertain due to the conflict in the Middle East, he said.

Although the decline of inflation to date was ‘encouraging’, it would not continue, he said, due to the role of base effects.

‘Even if energy prices remain where they are, I expect the inflation rate to rise again somewhat’, he said. ‘For some months to come, the road ahead will probably be a bumpy one with many ups and downs.’

Underlying inflation remained ‘quite strong’, he said, making the current phase of disinflation ‘the most difficult part of our journey forward.’

Policy easing too soon would threaten the attainment of the price stability objective and thus put expectations at risk, he said, calling for patience.

‘In any case, we must maintain our current restrictive policy stance until we are certain that price stability will return on a lasting basis’, he said.