(Bloomberg) -- The European Central Bank shouldn’t hurry too much to lower borrowing costs but remain flexible, according to Governing Council member Joachim Nagel.
The Bundesbank president, who’s attending the International Monetary Fund annual meetings in Washington, said all options are on the table for policymakers’ final meeting of the year in December, though he wouldn’t be drawn on a possible outcome.
“We shouldn’t be too hasty,” he told Bloomberg Television on Thursday. “We will have all the optionalities and these optionalities are based on the data that we have in December.”
With euro-area inflation likely to reach the ECB’s 2% target sooner than expected in 2025 and the economy struggling to expand, discussions among officials about what to do next are becoming more controversial. Doves are urging faster and steeper cuts, but hawks like Nagel don’t want to rush with some risks to prices lingering.
The ECB last week sped up its easing campaign with its first back-to-back cut. Investors and analysts now expect a series of consecutive reductions until the deposit rate – currently at 3.25% — reaches 2% or even lower mid-next year.
Inflation eased below the 2% goal in September for the first time since 2021, while a monthly poll of purchasing managers released earlier Thursday showed the region’s private-sector economy remained stuck in a second month of contraction in October.
On inflation, “we are on track,” Nagel said. “We are rather confident that we will achieve our target maybe by mid-next year. So this is a success story.”
ECB President Christine Lagarde said this week that the direction for rates is “clear,” but the pace of future action is yet to be determined.
Nagel said the ECB’s updated quarterly outlook will offer officials some pointers but declined to offer his view on the next meeting.
“The new projections will include the year 2027, and then we have maybe more guidance, more orientation,” he said. “But I’m not in favor to speculate too much what is necessary in our December meeting. This is definitely, I believe, not helpful.”
--With assistance from Alexander Weber.
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