ECB’s Nagel: No Inevitability; Still Have to Find the Right Point to Cut Interest Rates Further

10 June 2024

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Joachim Nagel on Monday said that there was no inevitability about the next ECB interest rate cut, but that rather, its proper timing was still something policymakers needed to determine.

In a speech at the regional office for Saxony and Thuringia of the German Bundesbank, which he heads, Nagel said, ‘One thing is clear to me: we must remain cautious. Because there is still a great deal of uncertainty about future economic and price developments.’

‘Figuratively speaking: I don't see us on a mountaintop from which things will inevitably go down’, he continued.  ‘Rather, I see us on a ridge where we still have to find the right point for the further descent.’

The Council thus stressed last week the data-dependent, meeting-by-meeting approach to monetary policy, he said.

Inflation was still ‘too high’ and needed to return to the ECB’s 2% price stability objective, he said. That it would do so was ‘not a foregone conclusion’, he said, pointing to the elevated growth rates of service prices and wages.

On the German economic front, there were ‘also encouraging signs’, he said, as reduced inflation and the high wage growth could promote household consumption.