Bundesbank's Nagel Says ECB May Need to Raise Rates to Restrictive Level

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The European Central Bank may need to raise interest rates to a level that restricts economic growth, Bundesbank President Joachim Nagel said. Speaking in London during a visit, Nagel said, "If we are faced with a situation where such high energy prices persist for a long time, we cannot rule out that monetary policy will have to move into mildly restrictive territory," adding that it is too early to judge whether that will happen. The ECB is widely expected to continue tightening after two rate hikes, and markets have priced in up to three more increases in this hiking cycle. Euro-area inflation is above 3% and is expected to remain above the ECB's 2% target for another year. Nagel referred to upcoming wage negotiations in Germany and elsewhere, saying he is concerned they could lead to second-round effects, and stressed, "We must not let our guard down."

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Nagel says ECB may need to raise rates to a restrictive level, signaling further tightening and higher policy rates.

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