Bundesbank President Joachim Nagel has signaled a potential preference for a pause in interest rate hikes ahead of the European Central Bank’s (ECB) upcoming decision on July 24th. In remarks to the Handelsblatt, Nagel emphasized the need for a “calm hand” in monetary policy, highlighting the uncertainty surrounding the impact of geopolitical tensions and ongoing trade disputes with the United States on price stability.
The ECB has raised the relevant deposit rate in the Eurozone in eight steps since last summer, bringing it to 2.0 percent. Inflation currently stands at 2.0 percent, a level deemed optimal by the ECB. However, trade uncertainty remains a significant factor impacting financial markets and hindering economic development.
Nagel anticipates this conflict will be a key discussion point at the upcoming G20 finance ministers and central bank governors meeting in Durban this weekend. He underscored the EU’s desire for a swift resolution with the United States, although cautioned that such a resolution should not come at any cost.
Financial markets currently expect a further interest rate adjustment by the ECB at its September meeting, when the bank will also release its routine projections for inflation and economic growth. Nagel suggested that this timeframe would likely be appropriate for a reassessment of the prevailing situation.
