Joachim Nagel, a member of the European Central Bank's Governing Council, recently stated that as the eurozone economy slows, the central bank should take gradual interest rate adjustments to bring borrowing costs down to a neutral level that no longer restricts economic activity, but avoid excessive rate cuts. He emphasized that in the current economic climate, one should not act too hastily, especially in a highly uncertain environment. Nagel's remarks once again highlighted a cautious and gradual policy approach.
At an event in Luxembourg on Wednesday, Nagel noted that eurozone consumer price growth has slowed significantly as expected, implying that interest rates should "slowly approach the neutral zone." He further pointed out that inflation does not yet pose a risk of falling below expectations, and the eurozone economy is not facing serious expansionary pressure. Nagel added that although the market expects the European Central Bank to announce a fourth rate cut at next week's meeting, he is not in a hurry to make a decision, stating that he is still waiting for new economic forecasts.
Nagel's remarks align with the views of other senior officials at the European Central Bank. Particularly, Executive Board member Isabel Schnabel has also emphasized that the central bank should not overly stimulate the economy to avoid entering an excessively accommodative interest rate range, which could have negative effects. However, some dovish officials, such as Banque de France Governor Francois Villeroy de Galhau and Bank of Italy Governor Fabio Panetta, believe that the European Central Bank should not rule out the possibility of further rate cuts.
Regarding the outlook for the German economy, Nagel stated that there is currently no major demand component supporting a strong recovery of the German economy in the short term, and the economy remains weak. He noted that the current situation does not provide enough signals indicating that the German economy will experience a significant recovery.
As the European Central Bank's policy meeting on December 12 approaches, the market remains highly focused on the central bank's potential further actions.
