Bundesbank President Joachim Nagel said on Sunday, “If the data trend continues, more interest-rate increases have to follow — that’s already agreed in the Governing Council. We have to be determined, in October and beyond.”

Nagel added that interest rates are still “somewhat off the levels” to curb inflation. “We must bring inflation back under control,” he said. “We mustn’t let up, even if the economy worsens.”

On the German economy, he said that momentum will likely slow in Q3 and Q4, but he’s confident that it could avoid a steep slump.

ECB kept main refinancing rate unchanged at 0.00% as widely expected. The forward guidance is also held unchanged. That is, “key ECB interest rates to remain at their present levels at least through the summer of 2019.

Full statement below.

Monetary Policy Decisions

At today’s meeting the Governing Council of the European Central Bank (ECB) decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.40% respectively. The Governing Council expects the key ECB interest rates to remain at their present levels at least through the summer of 2019, and in any case for as long as necessary to ensure the continued sustained convergence of inflation to levels that are below, but close to, 2% over the medium term.

Regarding non-standard monetary policy measures, the Governing Council intends to continue reinvesting, in full, the principal payments from maturing securities purchased under the asset purchase programme for an extended period of time past the date when it starts raising the key ECB interest rates, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation.

The President of the ECB will comment on the considerations underlying these decisions at a press conference starting at 14:30 CET today.

ECB Governing Council member Olli Rehn said stubbornly low inflation expectations could be a result of investors’ doubt of the central bank’s policy. he said “firstly, long-lasting slow inflation may have lowered inflation expectations durably, and even so that they are easily moving downwards”. And “secondly, markets may find that monetary policy measures are not, under the current circumstances, effective enough to accelerate inflation.”

Additionally, Rehn hinted that some policymakers could prefer to keep interest rate at current level beyond the end of this year. He said “some of us were of the opinion that the low interest rate policy could have been pursued even a little longer”. And, “in this situation of economic uncertainty and weaker growth, there are reasons to pursue a very stimulating monetary policy.”