The head of the Bundesbank is not convinced that inflation would be sufficiently under control to suspend interest rate hikes, financial media Bloomberg reports.
European member of the central bank (ECB) council, governor of the German central bank (Bundesbank). Joachim Nagel pours cold water down the necks of those hoping for an end to interest rate hikes. Nagel says the news agency Bloomberg’s in the interview, that inflation, i.e. the rise in consumer prices, is not sufficiently under control to stop raising the interest rate.
“I think it’s far too early to think [korkojen noston] suspension,” he told Bloomberg on Thursday.
Nagel said he would wait for more numbers before making a decision.
“We should not forget that inflation is still around five percent. This is too high. Our goal is two percent. There is still some way to go,” he said, according to Bloomberg.
Annual inflation in the euro area was 5.3 percent in July. The rate of price increase has clearly slowed down from the peak in October, but on the other hand, it is still far from the ECB’s two percent target. According to the central bank’s price stability objective, inflation should be two percent in the medium term.
Core inflation, adjusted for energy and food, also showed signs of acceleration in July. In an interview with Bloomberg, Nagel calls base inflation sticky.
ECB will next make monetary policy decisions in September. At the end of July, the ECB raised interest rates for the ninth time in about a year.
At the end of July, the interest rate for basic financing operations was raised to 4.25 percent and the deposit rate for commercial banks to 3.75 percent.
The ECB did not hint at its next steps at the time, but the President did Christine Lagarde however, was absolutely sure that there will be no interest rate cut in September.
He said at the press conference that the next interest rate decisions will be made solely on the basis of new information from the economy.
“Inflation still seems to remain faster than the target for a longer period of time, although it is expected to slow down in the coming months. There are varying data on the economy, but the inflation rate calculated without energy and food prices [pohjainflaatio] has been quite fast,” stated the ECB’s monetary policy council in its decision at the end of July.
Since then, ECB sources have signaled several times that even if the ECB does not raise interest rates in September, it may do so in the following months.
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