Fight against inflation
Bundesbank: Don’t rush into cutting interest rates
Given the reduced inflation and weak economy in the Eurozone, many economists expect further key interest rate cuts from the European Central Bank. Bundesbank President Nagel warns against haste.
Bundesbank President Joachim Nagel urges restraint with regard to future interest rate decisions by the European Central Bank (ECB). “I advise you to remain cautious and not rush into anything,” said Nagel at an event in Frankfurt, according to the text of the speech.
“Price stability is not far away, but the last part of the journey still has to be taken,” emphasized Nagel. Inflation in services in particular remains elevated. “In December, the Governing Council of the ECB will have a new forecast. It will show us whether we are still on track with inflation developments.” The ECB’s data-dependent approach has proven successful.
Investors are betting on further interest rate cuts in December
The ECB cut the benchmark deposit interest rate by 0.25 percentage points to 3.25 percent in October. It was the third interest rate hike this year. In view of the weak economy and the significantly lower inflation rate in the euro area, which was 1.7 percent in September, many economists expect a further interest rate cut at the next ECB decision in mid-December. There were also calls for a big interest rate cut of 0.5 percentage points.
In Germany, the largest economy in the euro zone, the inflation rate rose surprisingly significantly to 2.0 percent in October. Some economists are therefore warning against the ECB cutting interest rates too quickly.
“The monetary policy course must ensure that the inflation rate settles at two percent in the medium term,” said Nagel. “Keeping our promise of stability is crucial for the trust that people have in us, especially after the inflation experiences of the past few years.”
dpa
Source: Stern
