Too early to discuss cutting rates: ECB’s Nagel

IT is too early for the European Central Bank (ECB) to discuss cutting interest rates because inflation remains high, ECB policymaker Joachim Nagel said on Monday (Jan 15).

The Bundesbank president, a policy hawk who favours higher rates, was once again pushing back against market expectations for the ECB to begin lowering borrowing costs from the spring.

“It’s too early to talk about cuts, inflation is too high,” Nagel said on Bloomberg TV. “I want to see new data. We will wait for the next Governing Council meeting, and we will see.”

Money markets currently price in nearly 150 basis points worth of cuts to the ECB’s deposit rate this year, most likely starting in April.

But Nagel said the mistake of lowering interest rates too early should be avoided. “Maybe we can wait for the summer break or whatever but I don’t want to speculate,” he added.

His Austrian colleague Robert Holzmann, also quoted by Bloomberg, said no one should count on the ECB cutting rates at all this year in light of conflicts in the Red Sea pushing up the cost of shipping through the Suez Canal. REUTERS