Nagel says inflation warrants ECB attention beyond October


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The European Central Bank must be resolute in its response to inflation rates that could hit double digits later this year, according to Bundesbank President Joachim Nagel.

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“If the trend in the data continues, further interest rate hikes must follow – this is already agreed in the Governing Council,” he said on Sunday. “We have to be determined, in October and beyond.”

The ECB raised rates by a historic three-quarter point this month and economists predict another such move could follow as policymakers grapple with record inflation. Nagel argued that borrowing costs are still “somewhat outside the levels” needed to calm price pressures.

“We need to bring inflation under control,” he said. “We must not let go, even if the economy deteriorates.”

The job of policymakers is complicated by a rapidly deteriorating outlook and threats of energy rationing this winter. A recession is still not part of the ECB’s baseline scenario, even though IMF staff have revised down their growth projections for the next two years.

Speaking at the German central bank’s open day in Frankfurt, Nagel said momentum was likely to slow in the third and fourth quarters, but said he was confident the economy can avoid a sharp recession. His remarks echo remarks made on Saturday at the same event.

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