ECB’s Nagel: “We Are Well Advised to Remain Cautious Given the Uncertainties”

17 September 2025

By Marta Vilar – MADRID (Econostream) – European Central Bank Governing Council member Joachim Nagel on Wednesday defended the ECB’s cautious approach, saying it was justified by the uncertainties.

In a speech at the Harvard Club Rhein-Main in Frankfurt, Nagel, who heads the Deutsche Bundesbank, argued that the inflation path in the ECB’s latest projections was aligned with its medium-term 2% target.

“In view of this inflation picture, I consider the decision of the ECB last Thursday to keep interest rates unchanged was the right one,” he said. “We are well advised to remain cautious given the uncertainties.”

The ECB’s current policy stance left it well positioned to respond to unexpected developments, he said.

Turning to the US, he warned that a lasting erosion of the Federal Reserve’s independence would have “serious” consequences, threatening America’s economic and financial stability.

“But it could also tempt short-sighted politicians in other countries to put pressure on their independent central banks, forcing them to cut interest rates more than is warranted from a stability-oriented perspective,” he said.

Nagel warned that lower rates do not necessarily provide fiscal relief and could even have the opposite effect.

On trade, he welcomed the US-EU agreement as ruling out a trade war and reducing uncertainty but questioned Washington’s commitment to the deal.

“Recent threats and restrictions raise doubts as to whether the agreement will last long,” he said. “But even if it were to survive, the US tariffs will burden European export companies. German companies will suffer most.”

Nagel said tariffs would stoke US inflation and push up input costs in Europe, though the ultimate effect on overall Eurozone inflation remained unclear.

While tariffs would hurt Eurozone and German growth, he noted, the impact would likely be less severe than initially feared.