ECB Insight: Scicluna and Nagel Conclusions Align, Suggesting Pause Could Last

16 September 2025

By David Barwick – FRANKFURT (Econostream) – It’s still possible to believe the European Central Bank’s Governing Council could cut rates again this year — if one expects the environment to change enough to make next year’s undershooting of the target look less transitory.

What’s no longer convincing is the notion that, beneath the surface, enough Council members are sufficiently eager to cut that what was beaten back in September will inevitably reappear by December.

One particular aspect of the interview we published today with Council member Edward Scicluna, who heads the Central Bank of Malta, underscores this well, namely the unexpected convergence of his viewpoint with that of Bundesbank President Joachim Nagel.

We don’t mean the mere ability to agree with last week’s decision by the ECB to stand pat – this was unanimous, as ECB decisions often are. Nor do we suggest a deeper philosophical alignment, which they are still far from.

Rather, we simply mean that both a hawk and a dove reached a conclusion in favor of a pause based on the common fear that easing could actually prove counterproductive.

In an interview published Saturday by German news daily Frankfurter Allgemeine Zeitung, Nagel voiced this idea bluntly. “Further interest rate cuts could jeopardize” the present situation in which “the latest forecast indicates that inflation is more or less consistent with our target in the medium term,” he said.

Scicluna on Monday was less blunt, but still entirely clear in his characterization of the situation as a fragile equilibrium best not interfered with. “…I don’t think we should meddle at this stage, because of possible downside risks that might not materialize,” he said, for example.

It was at that point in the interview that we pointed out the similarity with Nagel to Scicluna (Council members do not track each other’s public remarks with quite our enthusiasm), who immediately agreed that the underlying sentiment was the same.

“There you are,” he replied. “It [cutting now] would be what I called tempting fate.”

We remember that Scicluna would have been willing to start cutting in March 2024, rather than wait, as the ECB ultimately did, until June. Yesterday, however, even as he was quite clear about downside risks to inflation, he consistently avoided talking up the idea of cutting again.

Overall, what we heard has led us to rerank Scicluna on our hawk-dove page (our informal spectrum of Council members’ policy leanings), where he is now seen as slightly dovish rather than more clearly so. Still, there is much space between him and Nagel, who is clearly hawkish, albeit less so than some others (and his predecessors).

The fact that he and Nagel see eye to eye in this fundamental regard, even as the one remains more concerned about downside risks and the other about upside risks, indicates a certain alignment across the spectrum on the question of whether the current constellation of inflationary forces deserves a policy response.

The negative answer to this question reinforces the idea that it would require a clear shift in the environment to jog the ECB into cutting further.

Again, one can always harbor the expectation that the next set of macroeconomic projections will constitute that shift, for example. The view however that there is anything inevitable about another cut this year because enough Council members are so inclined has become, at best, tenuous. We don’t share it.