HomeLive CommentsBundesbank's Nagel: Encouraging inflation outlook doesn't mean hike cycle is over

Bundesbank’s Nagel: Encouraging inflation outlook doesn’t mean hike cycle is over

In a speech in Cyprus today, Joachim Nagel, ECB Governing Council member and Bundesbank President, described the inflation outlook as “encouraging”. But he was quick to caution that this “that does not necessarily mean that the current hike cycle is now over.”

Nagel emphasized the potential need to raise rates again if the “inflation outlook worsened”

He mentioned that a downside surprise, where price growth returns to ECB’s 2% target quicker than anticipated, is “much less probable.” As a result, Nagel believes it is too soon to even consider the possibility of rate cuts.

On the economic growth front, Nagel projected a rebound next year. He noted that wage growth remains robust and pointed out that the disinflationary effect of falling energy prices has faded.

Nagel also specifically advocated for a “significantly” smaller balance sheet. He stressed his preference to “err on the side of caution” to ensure a timely return to price stability.

Featured Analysis

Learn Forex Trading