Nagel: ECB does not plan to lower interest rates again soon

Following last week’s first interest rate cut since 2019, the European Central Bank may not lower borrowing costs again for some time, at least that is what ECB Governing Council member Joachim Nagel stated today in Leipzig. According to him, policymakers must remain cautious amid still significant uncertainty regarding the economy and price pressures, Bloomberg reports.

Nagel also reiterated that the ECB will base its future interest rate decisions, as it has so far, on inflation data, depending on how quickly it will approach the targeted level of 2 percent.

– Metaphorically speaking, I do not see us at the top of a mountain from which we will inevitably descend. On the contrary, I see us on a ridge where we still need to find the right point for further descent – described the current situation Nagel, who also heads the German Bundesbank.

Everyone is waiting for September

On the other hand, referring to the ECB’s quarter-point interest rate cut last week, Nagel’s Irish colleague Gabriel Makhlouf went so far as to suggest that the ECB may not continue with further monetary policy easing at all.

Also, earlier today, the Governor of the National Bank of Slovakia Peter Kazimir, also a member of the ECB Governing Council, stated that policymakers have not yet defeated the ‘beast of inflation’ and asserted that the September meeting will be crucial for officials to decide whether to further lower interest rates or not.

Martins Kazaks from Latvia stated that the ECB must ensure that inflation does not return to high levels.

Targeting 2 percent only next year?

Although inflation in the eurozone is slowing, wage growth accelerated at the beginning of the year, which experts warn could boost private consumption in the coming months. Therefore, the ECB’s interest rate cut was accompanied by projections of consumer price growth this year and next year averaging 2.5 and 2.2 percent, respectively.

Nagel added that inflation in the euro area will gradually slow towards the ECB’s target of 2 percent, which it could reach by the end of 2025. However, that is later than previously anticipated.