German ECB Governing Council member Joachim Nagel emphasized emphasized that ECB should avoid being on “autopilot” when determining the timing of interest rate cuts.
Speaking at the London School of Economics, he stressed that as ECB approaches the neutral rate, a “gradual approach” becomes more appropriate. Given the current uncertainty, he argued, “there is no reason to act hastily.”
Nagel remains confident that inflation will return to 2% target by mid-year, saying, “We are not at our target, but I’m really very convinced that we will come to our target by the midst of this year.” He also dismissed concerns of an inflation undershoot.
Bundesbank staff estimates place the neutral interest rate within a range of 1.8% to 2.5%, slightly below ECB’s current deposit rate of 2.75%.
However, Nagel warned against relying too heavily on neutral rate estimates, calling it “risky” to base monetary policy decisions on uncertain theoretical benchmarks. Instead, he emphasized that the ECB relies on a variety of financial, real-economic, and other indicators to guide its policy stance.
![Pinterest](https://pinterest.com/pin/create/button/?url=https://www.actionforex.com/live-comments/586142-nagel-advocates-gradual-rate-cuts-as-ecb-nears-neutral/&media=https://www.actionforex.com/wp-content/uploads/2018/04/f-ecb13.jpg&description=German ECB Governing Council member Joachim Nagel emphasized emphasized that ECB should avoid being on "autopilot" when determining the timing of interest rate cuts.){kind=link}