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ECB's Nagel States That It Is "Far Too Early" To Declare Victory Over Inflation
According to a statement published on Sunday in the Cypriot newspaper Kathimerini, Bundesbank President Joachim Nagel predicted that inflation in the Euro zone would continue to decline in the coming months, albeit at a reduced rate.
Inflation in the Euro zone declined to 2.4% in November from 2.9% in October, significantly below expectations for the third consecutive month and fueling market rumours that the European Central Bank (ECB) may reduce interest rates more quickly than it currently forecasts.
"The battle against inflation is not yet won," stated Nagel, who travelled to Cyprus last week. He compared inflation to a "greedy, obstinate beast" and predicted that the subsequent phase would be more challenging to subdue.
"Add to that the possibility that a rise in geopolitical tensions could lead to increased inflation, and it becomes abundantly clear that it is far too early to declare victory over high inflation rates," said Nagel, a prominent member of the Governing Council of the European Central Bank (ECB), which sets interest rates.
"I am unable to determine whether the peak of interest rates has already been attained. Interest rate decisions are made by the ECB Governing Council meeting by meeting in accordance with a data-driven methodology.
Nagel further stated that a reduction in dampening base effects and the gradual elimination of measures to limit high energy prices in numerous European countries moderated the inflation outlook. Additionally, he alluded to the anticipated perpetuation of robust wage expansion.
"All in all, I expect inflation to carry on declining, but at a slower pace and with possible bumps along the way," according to Nagel.
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