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Bundesbank chief Nagel backs raising ECB rates to 2.5%
🇬🇷 Greece /Economy & Trade

Bundesbank chief Nagel backs raising ECB rates to 2.5%

From Ta Nea · () Greek

Translated from Greek and summarized by DistantNews. Read the original for the full story.

At a glance

Interview Named sources New plan
  • Bundesbank President Joachim Nagel said inflation near 3% remains above the European Central Bank’s 2% medium-term target.
  • He indicated that higher interest rates may be needed to bring inflation back to target, while warning that volatile oil and gas prices create uncertainty.
  • Nagel also called for deeper European economic integration and said common debt could support defense spending under narrowly defined conditions.

Joachim Nagel has made a clear case for another European Central Bank rate increase, even as he cautions against reading too much into the next policy decision. The Bundesbank president said inflation is currently around 3%, rather than the ECB’s 2% target, and is not yet close enough to the medium-term objective.

For now, inflation, which is around 3% rather than 2%, is not close to our medium-term target.

— Joachim NagelNagel explained why he supports tighter monetary policy.

In an interview with Le Monde, Nagel said June forecasts indicated that inflation would return to 2% over the medium term only if interest rates rose further. He remained cautious about offering more guidance, however, pointing to continuing fluctuations in oil and natural gas prices and highly volatile financial markets.

“There is a great deal of uncertainty. It is an uncomfortable situation, including from a monetary policy perspective,” Nagel said. He added that the ECB’s meeting-by-meeting approach had served it well and would continue to do so.

According to the June forecasts, inflation will return to 2% over the medium term only if interest rates are higher.

— Joachim NagelHe linked the inflation outlook to the level of interest rates.

Nagel said the euro area had proved resilient despite wider economic pressures. Second-quarter growth across the bloc exceeded expectations, while Germany’s export data remained fairly solid and construction orders were described as respectable. German growth is still modest, he said, but the country is on course for roughly 1% growth this year, above the Bundesbank’s June forecast.

There is a great deal of uncertainty. It is an uncomfortable situation, including from a monetary policy perspective.

— Joachim NagelHe described the effects of volatile energy prices and financial markets.

Asked about tariffs under Donald Trump and China’s economic closure, Nagel argued that Germany and the euro area could benefit from stronger European growth. He called for deeper integration in savings, investment, banking markets and energy. He also said common European debt could serve a specific purpose, such as defense spending, under tightly defined conditions, but should not become an excuse for avoiding sound fiscal policies.

Europe must become stronger and much more economically integrated.

— Joachim NagelNagel argued for deeper integration to strengthen European growth.
About this summary

Originally published by Ta Nea in Greek. Translated, summarized, and contextualized automatically by DistantNews, with a note on how the source frames the story. Not individually reviewed before publishing. How this works.

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