Interest rate cuts? "Some people have already speculated"
The time of interest rate hikes by the ECB is over, inflation in the eurozone has calmed down. Will this soon lead to interest rate cuts? Bets are being placed, but Bundesbank boss Nagel warns us to be vigilant. It could turn out differently.
Bundesbank President Joachim Nagel believes the European Central Bank (ECB) is on the right track in its fight against inflation after ten interest rate hikes. "Inflation is falling. Monetary policy is working," he told t-online, "and we are not experiencing a recession." This is good news for everyone and for the economy, he added. However, Nagel pointed out that inflation in Germany would rise again temporarily due to special effects. Commerzbank is even forecasting a rate of four percent for January.
Nagel also once again countered speculation of rapid interest rate cuts. The ECB has raised the key rates in ten steps by a total of 4.5 percentage points since summer 2022 to combat the price surge. The key deposit rate on the financial market is therefore currently at 4 percent - the highest level since the start of the monetary union in 1999. However, the ECB kept its feet still at its most recent two interest rate meetings in October and last week.
The most recent inflation rate in the eurozone was only 2.4 percent in November. The ECB is aiming for 2 percent as the optimum value for the 20-country community. It expects an average rate of 2.7 percent for 2024 as a whole.
Nagel urged vigilance. "There is a high probability that interest rates have peaked," he said. "To all those who are therefore speculating on an imminent interest rate cut, I say: be careful, some have already speculated." On Monday, Slovenia's central bank chief Bostjan Vasle, Greece's central bank chief Yannis Stournaras and the central bank governor of Slovakia, Peter Kazimir, also countered such speculation.
Most recently, the financial market had been betting on a first interest rate cut as early as March. Nagel pointed out that inflation in Germany is likely to rise again temporarily at the turn of the year. A year ago, the government took over the monthly payments on account for gas and district heating on a one-off basis. "This is now no longer applicable, which is why prices are noticeably higher compared to then," said Nagel. He therefore believes: "Overall, we must remain vigilant: Fighting inflation is not a sure-fire success."
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Source: www.ntv.de
