ECB’s Nagel: The Inflation Beast ‘Has at Least Been Tamed’, ECB to Remain Cautious

20 December 2024

By Marta Vilar – MADRID (Econostream) – European Central Bank Governing Council member Joachim Nagel said on Friday that the inflation beast had now been tamed but suggested that there was still more to be done.

In an interview with German weekly newsmagazine Focus, Nagel, who heads the Deutsche Bundesbank, said that ‘the [inflation] beast has at least been tamed. We now have price increases well under control.’

Core inflation would keep easing and wage growth was also slowing down in the entire euro area, he said.

The ECB should keep cutting interest rates, according to Nagel, but should stick to a cautious approach.

‘All in all, we are moving in an environment of high uncertainty’, he added. ‘Geopolitically, we are currently dealing with an enormous amount of upheaval. More than I have ever experienced before: the war in Ukraine, the conflicts in the Middle East, economic tensions and possible trade conflicts, to name just a few.’

Asked how fast the ECB should keep cutting rates, Nagel said that the ECB would keep assessing that in a meeting-by-meeting, data-dependent approach.

‘So far, this approach has worked well’, he said. ‘We can certainly go a little lower in interest rates, and in the first half of 2025 we may reach a neutral level without risking a rise in inflation.’

If US President-elect Donald Trump were to implement his tariff threats, ‘we would have to expect significant economic losses and higher inflation worldwide', he said.

A decoupling from China was not in Germany’s interest, according to Nagel.

The situation in France was not giving him ‘sleepless nights’, he said, and he assumes that the French government would take applicable fiscal rules seriously.

Asked about French bond spreads, Nagel said, ‘Without going into detail about individual countries, the financial markets are currently showing that the Eurozone is considered stable.’