At a conference today, Joachim Nagel, Bundesbank President and ECB Governing Council member, said that if data in the next six weeks bolster confidence in achieving ECB’s 2% inflation target, he would support a reduction in interest rates in June. However, he emphasized that “such a step would not necessarily be followed by a series of rate cuts.”
He stressed the current climate of uncertainty, noting, “Given the current uncertainty, we cannot pre-commit to a particular rate path.” This approach underscores ECB’s strategy of making decisions “meeting by meeting and based on incoming data.”
Further, Nagel admitted of his reservations and expressed that he is “not fully convinced yet” that price growth is firmly on a path toward target. Core inflation, particularly within the services sector, remains elevated, driven by persistent strong wage growth, which tends to be more durable than goods inflation.
Nevertheless, by June “we will know a lot more,” about the inflation path, he added.
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