New Signal for Possible Rate Hike from Bundesbank President Nagel

Bundesbank President Nagel stated that developments in energy prices will determine the course of monetary policy, noting that it may be necessary to move into a slightly restrictive zone in the economy.

Energy Prices and Monetary Policy

Following the rapid rise in oil and natural gas prices due to the Iran war and officials raising interest rates for a second time, the Bundesbank President spoke to CNBC. It was emphasized that developments in energy prices will be the key factor determining the course of monetary policy.

Interest Rates and the Neutral Zone

Referring to the range where interest rates neither brake nor stimulate the economy, Nagel stated that they are at the upper bound of the neutral zone. The possibility of needing to move into a slightly restrictive zone was not ruled out.

Inflation and Growth Expectations

It was stated that inflation is currently hovering above 3% and that the Eurozone economy has weathered the effects of developments in the Middle East well. According to projections published on Thursday, inflation is expected to remain at the 3% level this year.

Future Interest Rate Steps

Investors expect the European Central Bank to implement three more rate hikes in the coming months. Sources reported that officials expect interest rates to rise, with a hike possible as early as October.