Bundesbank President Nagel indicates the ECB may raise rates unless inflation and growth data show marked improvement.
The European Central Bank is poised to raise interest rates further unless economic conditions improve significantly, according to Bundesbank President Joachim Nagel. His remarks suggest the ECB remains focused on combating inflation despite recent signs of economic slowdown in the eurozone.
Nagel’s comments follow the ECB’s July rate hike, which brought the deposit rate to 3.75%. Markets had anticipated a pause in September, but persistent inflation above the ECB’s 2% target may prompt further tightening. The eurozone’s inflation rate stood at 5.3% in August, unchanged from July.
Investors are now pricing in a higher probability of another rate increase by year-end, with bond yields rising slightly in response to Nagel’s hawkish tone.