Nagel backs a December ECB rate rise as inflation risks worsen
Bundesbank President Joachim Nagel said a European Central Bank rate rise in December is “very likely necessary” unless the inflation outlook improves significantly. The ECB held its deposit rate at 2.5% last week; Reuters reports that Nagel sees inflation approaching the bank’s adverse scenario, while energy costs remain the main driver and there is little evidence so far of spillover into wages.
Bottom line — A December move would be the ECB’s third rate rise this year; the decision will be based on new projections.
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Reuters reports that the ECB expects inflation to exceed 4% in the coming months, against its 2% target.
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Nagel said the inflation outlook had worsened since the ECB’s September projections, according to Reuters.
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Reuters reports that Bulgarian central bank chief Dimitar Radev also said the October pause did not mean tightening was over.
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Nagel warned that repeated energy-price increases could feed into wage demands and push prices higher, according to Econostream.
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Bloomberg reports that the ECB’s next projections will extend through 2029.
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Reuters reports that investors expect two to three rate rises over the coming year, although a December move is not fully priced in.