Another European Central Bank interest-rate rise in December seems almost inevitable, Bundesbank president Joachim Nagel said on Tuesday, joining a growing list of policymakers backing a move that would be the bank’s third this year.
Mr Nagel, a key voice on the ECB’s Governing Council, told an audience in Berlin: “From today’s perspective, an interest rate hike in December is very likely necessary. There seems to be little alternative to an interest rate hike unless the inflation outlook improves significantly.”
The ECB left its key deposit rate on hold at 2.5% last week, on the premise that rapid inflation was not becoming embedded in the wider economy. But policymakers from different backgrounds have since argued that the pause was likely to prove temporary rather than the end of the tightening cycle.
Mr Nagel said inflation was approaching the ECB’s “adverse” scenario and that price pressures would be higher than outlined in the bank’s September projections. Bulgarian central bank chief Dimitar Radev reached a similar conclusion earlier on Tuesday, saying the inflation outlook had deteriorated since September and that the October pause “was a decision to assess the evidence, not a conclusion that monetary policy tightening is over”.
The ECB itself expects inflation to run above 4% in the coming months, more than twice its 2% target, before falling back rapidly from early spring as high year-earlier figures drop out of the annual comparison. Financial investors, meanwhile, see between two and three rate rises over the coming year, and a December move is not yet fully priced in.
Mr Nagel also acknowledged the limits of the bank’s power over the current surge, noting that it was primarily driven by energy prices, over which the ECB has no control, and that there was little evidence so far of it setting off second-round effects in wages and prices. Even so, he said the ECB remained “quite far” from achieving its price-stability mandate.
A December rise would cap a year in which the ECB has repeatedly tightened policy in response to stubborn inflation, and would set the tone for the euro zone’s economy heading into 2027. Whether the Governing Council follows Mr Nagel’s lead will depend on the inflation data published between now and its December meeting.
Note: the featured image is a file photo of the European Central Bank building in Frankfurt, taken in July 2019, not a photograph of Mr Nagel or the Berlin speech.
Sources: Reuters, “Bundesbank’s Nagel joins ECB chorus backing December rate hike” (https://www.reuters.com/business/bundesbanks-nagel-joins-ecb-chorus-backing-december-rate-hike-2026-11-03/).
