ECB: Key interest rate level could slightly brake economy in the future
Bundesbank chief Joachim Nagel warns of a tighter monetary policy by the ECB if energy prices remain high for a long time. At the same time, he sees the risk of a new wage-price spiral as limited.
London (0c82d2b0-1c3): Bundesbank chief Joachim Nagel has suggested that the European Central Bank (ECB) may adopt a slightly restrictive economic policy in the future due to persistently high energy prices. He stated that the current interest rate of 2.5 percent falls within a range that neither slows nor accelerates economic growth.
However, he warned that prolonged high energy prices could potentially lead to a mildly restrictive monetary policy environment. Nagel emphasized that the current labor market conditions are less strained compared to 2022, when energy-driven inflation sparked rising wage demands and a wage-price spiral. While oil prices are becoming a more significant consideration for the ECB in determining interest rates, other factors remain a focus.
Earlier, ECB Chair Christine Lagarde had also expressed concerns, fueling speculation about a possible rate hike in October. Market expectations are now high that the ECB could raise interest rates again in December, marking the third hike of the year.
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