ECB’s Nagel: More Rate Cuts Could Threaten Price Stability

13 September 2025

By David Barwick - FRANKFURT (Econostream) – European Central Bank Governing Council member Joachim Nagel said Saturday that additional ECB monetary policy easing would put price stability in the euro area at risk.

In an interview with German news daily Frankfurter Allgemeine Zeitung, Nagel, who heads the Deutsche Bundesbank, said that the Governing Council had left interest rates unchanged on Thursday because inflation projections were “more or less consistent with our target in the medium term.”

“Further interest rate cuts could jeopardise that: Let’s not forget that the economy is already being stimulated by rising defence spending and by the large investment package for infrastructure in Germany,” he continued.

As well, the medium-term evolution of inflation was subject to great uncertainty, but the ECB could handle this should the need arise, he said. There was thus no need to change the ECB’s “winning formula” of not pre-committing and instead preserving “maximum flexibility” by deciding meeting by meeting based on data, he said.

“There is no pressure to act at present: The interest rate level confirmed on Thursday allows us to wait and see how things develop,” he said

The ECB’s ability to react did not justify complacency, though, he said, noting that services inflation remained strong and that the environment was highly uncertain.

The inflation impact of US tariffs was so far “limited,” while German fiscal developments were only now starting to become expansive. German economic growth this year would be “very low,” he predicted.

“The higher government spending will then probably stimulate economic activity next year – that’s a positive development for starters,” he said. Still, European government debt needed watching, he said, cautioning that “[i]f markets were to get worried about the debt ratios of some euro area countries, there is a risk that dislocations might occur.”

Reduced German fiscal restraint would chiefly benefit 2026 growth, but much depended on the actual amount of additional investment and its nature, he said.

Nagel repeated earlier calls for a savings and investments union and a common European deposit insurance.

Turning to the US, he said that developments there, “in particular the attacks on the Fed, are worrying me a great deal.” Central bank independence “has ensured us low inflation rates and sustainable economic growth worldwide over the past decades,” he said.