ECB’s Nagel warns against cutting rates too quickly

Bundesbank President Joachim Nagel delivered a strong message overnight, cautioning that a timely return to price stability cannot be taken for granted.” He emphasized that ECB must tread carefully and “must not lower policy rates too quickly,”

“We are not there yet. While our 2% target is in sight, we have not reached it,” he added.

Nagel highlighted concerns that inflation, although nearing 2% target in late summer, is likely to rebound and remain above target well into 2025 due to persistent increases in service costs.

Addressing the differing views within ECB’s Governing Council, Nagel acknowledged the “intense” debates that typically accompany “turning points in the interest-rate cycle”.

However, he sought to dispel any notion of broader disagreement, stating, “When making their decisions, monetary policymakers are always faced with some degree of uncertainty. That is why a certain diversity of opinion among them as well as scope for their own judgment are considered features, not bugs.”