ECB’s Nagel: Wage and Productivity Developments Still Uncertain

23 April 2024

By Isabel Teles – FRANKFURT (Econostream) – European Central Bank Governing Council member Joachim Nagel on Tuesday said that the ECB would reduce interest rates when there was enough confidence about the inflation outlook, but that wages and productivity were still sources of uncertainty.

Speaking at the 23rd German Banking Congress in Berlin, Nagel, who heads the German Bundesbank, said, according to a text provided, ‘Before cutting interest rates, we must be convinced based on data that inflation will actually reach our target in a timely and sustained manner. This depends largely on the development of wages, productivity and profit margins.’

Even with the latest ECB forecast showing inflation at 2% by mid-2025, there was still uncertainty in the price outlook, he said.

‘For example, wage growth could decline more slowly, or productivity could recover less strongly than assumed in the forecast’, he said.

However, if June forecasts and new data confirmed the inflation outlook from March, ‘we can consider lowering interest rates’, he said.

The ECB’s tight monetary policy was producing results, he acknowledged.

‘Price stability is within sight’, he said. ‘Now we need to secure the last stretch of the road.’