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ECB must resist urge to cut rates early, Bundesbank chief says

The ECB broke a streak of 10 straight rate hikes last month and guided markets for steady policy ahead, fuelling bets that the first rate cut could come as soon as April.

“We are faced with the most difficult part of our journey forward,” Nagel said in a speech in Milan, largely repeating his earlier comments. “We need the patience to wait for the full effect of policy tightening on inflation to materialise.”

ECB President Christine Lagarde earlier said that rates could stay steady for several quarters and she warned against premature celebration as price growth, now below 3%, could rise again soon, primarily on technical factors.

Disinflation would then pick up pace again later in 2024 and the ECB could hit its 2% target in late 2025.

“Even if energy prices remain where they are, I expect the inflation rate to rise again somewhat,” Nagel said. “For some months to come, the road ahead will probably be a bumpy one with many ups and downs.”


Source: Economy - investing.com

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