ECB’s ‘Option April’: Nagel Warns Against Shying Away from Pre-emptive Hikes

Bundesbank President Joachim Nagel signaled today that an April ECB rate hike is a live option, driven by rising inflationary risks following the conflict-induced energy spike in Iran. Nagel emphasized that the Governing Council will have sufficient data by April to determine if action is required, warning that the ECB should not “shy away” from early tightening if wage growth and medium-term inflation expectations continue to climb.

Speaking with Reuters, the Bundesbank chief cited the sharp increase in energy costs stemming from the Middle East conflict. He argued that “every passing day contributes to an increase in inflationary risks”. His rhetoric suggests a shift toward pre-emptive action to protect medium-term inflation expectations.

While describing April as one of several possible options, Nagel pointed to mounting market speculation that the ECB could move sooner rather than later. “It is certainly an option, but just one option… We shouldn’t shy away from it now just because we think it’s still too early.”

Nagel’s primary concern is “secondary” inflation. While energy prices provided the initial shock, the Bundesbank is now hunting for signs of price hikes spreading into the broader services sector and wage negotiations. If wage growth suggests that higher inflation is taking root, the ECB may be forced to move in April to prevent a wage-price spiral that would be far harder to break later in the year.