By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Joachim Nagel on Wednesday said July and September remained open for possible further policy action, citing uncertainty about whether the recent decline in energy prices would prove sustainable.

Nagel, who heads the Bundesbank, told Bloomberg Television that the ECB’s June rate hike had been unavoidable on the basis of the information available at the time.

“When we took our decision in our June meeting, what we knew during that time was so convincing that there was only one solution”, he said. “We had to hike interest rates. This is what we did.”

Since then, the retreat in energy prices had been a surprise, Nagel said.

“I think before, many analysts and experts said more or less the opposite, that it would stay at elevated levels”, he said. “Now we are back more or less to pre-crisis level, so we have to wait [to see] how reliable and sustainable such a development is.”

The Governing Council would meet again in July and September, the latter meeting bringing new projections, he said.

“And so it’s still an open race”, he said.

Nagel rejected the idea that the June move had been an insurance hike.

“It never was an insurance hike”, he said. “We did what we have to do, fulfilling our mandate, bringing inflation back to our target.”

Inflation was likely to remain high this year and above the ECB’s 2% target next year, he said. At the same time, the geopolitical situation remained uncertain and “we have to wait”, he said.

Asked what data would be needed to decide on a July hike rather than September, Nagel said first-round effects were significant and that second-round effects could emerge if high inflation lasted.

“The first-round effects are significant, so I refer to the high inflation rates”, he said. “And if this stays long, then the probability is high that we will see also second-round effects.”

Nagel declined to speculate about further rate increases.

“I will keep optionality open for the July and for the September meeting”, he said.

Asked whether it would be easier to deliver another hike and then wait, Nagel said the ECB needed convincing data.

“This data-dependent approach, meeting to meeting — this is still the best way to conduct monetary policy in these very uncertain days”, he said.