ECB’s Nagel: Cannot Take Deflation for Granted in Coming Months

4 December 2023

By Isabel Teles – FRANKFURT (Econostream) – European Central Bank Governing Council member Joachim Nagel on Sunday said that future falls in inflation should not be assumed, notwithstanding the encouraging recent decline.

In an interview with the weekly Cypriot edition of Greek daily Kathimerini, Nagel, who heads the German Bundesbank, said that the fall in inflation and in energy prices should not lead to complacency. '[W]e cannot take it for granted that inflation will carry on falling in the months ahead.'

‘All in all, I expect inflation to carry on declining, but at a slower pace and with possible bumps along the way', he said, citing the weakening of base effects, the discontinuity of fiscal measures related to energy prices and strong wages as the main reasons.

It was too soon to consider the fight against inflation to be over, he said, as geopolitical developments could have a negative impact.

The bigger risk for Europe was in the energy market, he said, adding that ‘[w]ars have also raised the degree of uncertainty that affects the economic outlook.’

Further interest rate hikes were not ruled out, he said. ‘I can’t tell whether interest rates have already reached their peak', he said.

‘On the ECB Governing Council, we decide on interest rates on a meeting-by-meeting basis following our data-dependent approach’, he said.