By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Joachim Nagel indicated Tuesday that he saw a case for further tightening, with the December projections set to clarify whether interest rates need to move into restrictive territory.

“It seems to be a rather obvious outcome that we have to do something on top of what we did already,” Nagel, president of the Deutsche Bundesbank, told Bloomberg. “With these new numbers, we will have clarity.”

Nagel described current policy settings as “at the upper bound of neutral territory.” If the projections point to inflation well above 2%, “we have to go into restrictive territory,” he said. He declined to speculate on the size of any move and noted that the December forecasts would extend through 2029 for the first time.

Inflation is “too high,” Nagel said, even though the medium-term outlook appears “still pretty well anchored around our target of 2%.” He pointed to the recent rise in consumers’ inflation expectations as “a kind of an eye opener” and urged vigilance against second-round effects in wages and prices.

Asked about the sell-off in French government bonds and the possibility of ECB intervention, Nagel drew a distinction between the ECB’s monetary policy mandate and governments’ fiscal responsibilities. He applied that distinction to the ECB’s Transmission Protection Instrument.

“TPI has 100% a monetary-policy background,” he said. “It’s not a fiscal instrument, definitely not.”