The European Central Bank has further to go on tightening monetary policy, with core inflation remaining very high, according to Governing Council member Joachim Nagel.
(Bloomberg) — The European Central Bank has further to go on tightening monetary policy, with core inflation remaining very high, according to Governing Council member Joachim Nagel.
While it’s too early to speculate over the outcome of the ECB’s next meeting, in May, the Bundesbank chief told reporters Thursday in Washington that he expects the cycle of hikes to continue.
With underlying price gains still accelerating, “there’s still a way to go” on monetary policy, Nagel said. “It’s absolutely appropriate that, based on the events of the last few weeks, we’re now waiting to see to what extent these individual events may have led to financing conditions being further tightened.”
ECB officials agree that the unprecedented tightening that began last summer is nearing an end. But most say rates should rise again next month, and some have begun to discuss the size of that move.
Belgium’s Pierre Wunsch has said the choice is between a fourth straight 50 basis-point hike or a smaller, quarter-point move — and will depend on April’s inflation figures.
But with core price pressures, excluding energy and food costs, hitting another record last month and remaining sticky, Austria’s Robert Holzmann backs the larger increment.
“The discussion about the size isn’t helpful at this point because the information is still a little thin and I’d like to wait until May,” Nagel said. “What’s clear, however, is that monetary policy must continue to act decisively.”
(Updates with quotes from Nagel starting in third paragraph.)
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