Bundesbank President Joachim Nagel says the European Central Bank will probably raise interest rates in December because inflation has worsened. The ECB paused last week after two hikes since the start of the Iran war, and several officials say more action may be needed.
Joachim Nagel, a Governing Council member, said the ECB will probably raise rates in December due to worsening inflation. He spoke in Berlin. The Bundesbank President added that the September baseline projection for consumer prices already assumed another rate hike, and that the situation has deteriorated since then.
Nagel ties the decision to new forecasts
The ECB will have fresh economic forecasts through 2029 when officials meet next month. Nagel said repeated spikes in energy costs raise the risk of spreading to other prices. According to Investing.com, he said: "From today's perspective, however, there is likely no way around an interest-rate hike" unless the inflation outlook improves significantly.
However, Nagel said one reason for last week's pause was the lack of second-round effects so far. He said rising energy prices may increasingly feed through to wage demands as well, which would drive prices higher.
Other officials say the pause is not the end
The ECB kept rates unchanged last week after raising them twice since the start of the Iran war. Nagel told Bloomberg on Friday that additional action may be needed, and several officials have signaled additional action may be needed.
Bulgarian Governing Council member Dimitar Radev said Tuesday that the pause does not mean rate hikes are finished. Slovak counterpart Peter Kazimir said Thursday's decision was not a finish line.
Inflation data due Wednesday
Economists predict a final rate move next month, though investors anticipate tightening will continue beyond that into 2027. Eurostat is expected to report Wednesday that euro-zone inflation reached 4% last month, double the ECB's target. A core measure excluding volatile items like energy is forecast to have remained at 2.5%.
Source: Investing.com
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