The European Central Bank may have to continue raising borrowing costs beyond the summer, according to Governing Council member Joachim Nagel.
(Bloomberg) — The European Central Bank may have to continue raising borrowing costs beyond the summer, according to Governing Council member Joachim Nagel.
Underlying inflation, which excludes food and energy costs and is currently officials’ preferred gauge of price swings, won’t slow quickly, the Bundesbank chief said Friday in Niigata, Japan, at a Group of Seven meeting of finance and central-bank chiefs.
“There’s consensus in the Governing Council that interest-rate hikes should continue,” he told a briefing. “The data don’t allow us to consider changing our view that further rate hikes will be necessary, and that also applies for beyond the summer break.”
Nagel’s remarks are his strongest signal yet that the two quarter-point rate increases that economists widely predict in June and July may not be sufficient to return inflation to 2% from more than double that at present. The comments come a day after an ECB survey showed consumers’ expectations for prices shifting markedly higher over the next years.
Other ECB officials are also starting to accept that rate hikes may need to continue in September to bring price gains fully under control, according to people familiar with the debate.
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