- I will keep options open for July and September decisions
- Inflation will stay on high level this year
- Inflation will stay above target in 2027
- June move wasn't an insurance hike
ECB's Nagel said he will keep options open for both the July and September policy meetings, suggesting that future decisions will remain highly data-dependent.
We got a Reuters report yesterday citing sources saying that recent inflation developments have taken pressure off the ECB for a rate hike in July, although a case could be made if the June numbers were "nasty".
Given that yesterday's inflation data from France, Germany and Italy showed further easing, we shouldn't see upside surprises today and an ECB rate hike in July looks now very unlikely.
On inflation, Nagel warned that price pressures are likely to remain elevated throughout this year. While inflation has moderated from its peak, he noted that underlying pressures in wages and services continue to pose risks to price stability across the Eurozone.
He also cautioned that inflation may prove more persistent, stating that it is expected to remain above the ECB’s 2% target even in 2027. This reinforces concerns among more hawkish policymakers that the disinflation process could be slower.
Nagel additionally reiterated that the ECB’s move in June should not be interpreted as an “insurance hike". In other words, the decision was not a preemptive move made solely to guard against future inflation risks, but rather one based on the central bank’s assessment of prevailing economic conditions and inflation dynamics.
