ECB's Nagel: "June Rate Cut Is Not a Signal for Further Reductions"

"Cannot Promise Specific Path Considering Uncertainty"
ECB Agrees on June Rate Cut... Disagreement on Subsequent Path

The European Central Bank (ECB) is expected to cut interest rates before the United States in June, but Joachim Nagel, President of the Bundesbank, Germany's central bank, emphasized that even if rates are cut in June, this should not be interpreted as a signal for additional rate cuts within the year.

According to Bloomberg on the 24th (local time), President Nagel said at an event held in Berlin, Germany, "I support a rate cut in June," but added, "Such a measure (rate cut in June) does not necessarily lead to a series of rate cuts."

Joachim Nagel, President of the Bundesbank
Photo by AFP Yonhap News

Classified as a hawkish member among ECB policymakers, President Nagel believes that a rate cut could be possible by the ECB meeting in June if the likelihood of achieving the 2% inflation target increases. However, he maintains a cautious stance regarding the subsequent rate path. The timing and frequency of rate cuts by the U.S. Federal Reserve (Fed) within the year continue to be pushed back, and geopolitical tensions in the Middle East are escalating, increasing uncertainty. He stated, "Considering the current uncertainty, it is not possible to commit to a specific interest rate path in advance."

President Nagel is particularly concerned about inflation. He noted that core inflation remains high due to wage increases and said, "I am not yet fully confident (in achieving the 2% inflation target)." He added, "We will learn more about the inflation trajectory by June."

In fact, ECB policymakers have reached a consensus on a rate cut in June, but there are differing opinions on the path thereafter. At the recent International Monetary Fund (IMF) Spring Meeting, ECB policymakers expressed support for a rate cut in June. Even Robert Holzmann, Governor of the Austrian National Bank, who has consistently opposed rate cuts this year, said, "I am not completely certain, but I am leaning in that direction (June rate cut)."

However, opinions on the ECB's actions after June vary widely, ranging from the view that no further rate cuts should be made to the opinion that rates should be cut up to four times. Martins Kazaks, Governor of the Bank of Latvia, and Madis Muller, Governor of the Bank of Estonia, stated that additional rate cuts should not be rushed after the first cut in June. On the other hand, Gediminas Simkus, Governor of the Bank of Lithuania, said rates should be cut three times within the year, and Yanis Stournaras, Governor of the Bank of Greece, said rates should be cut four times. Going further, Edward Scicluna, Governor of the Central Bank of Malta, argued that if inflation forecasts fall below 2%, rates should be cut by 0.5% increments.

This content was produced with the assistance of AI translation services.