A European Central Bank interest-rate increase in December is “very likely necessary,” Bundesbank President Joachim Nagel said, according to a speech text delivered in Berlin. Nagel, who is a member of the ECB’s Governing Council, said that without a marked improvement in the inflation outlook, it would be difficult to avoid raising rates.
The Governing Council is due to hold its next monetary policy meeting on December 17. At its meeting last week, it left the deposit rate—an important benchmark for banks and savers—at 2.5%. The ECB has already raised its key rates twice this year in response to rising inflation, driven mainly by higher energy prices.
Higher interest rates make borrowing more expensive, which can curb demand and help bring inflation down. They can also weigh on investment and economic activity.
Energy prices have risen amid the Iran war. Euro-area consumer prices were 3.8% higher in September than a year earlier, the largest increase in three years. The ECB’s latest assessment is that elevated inflation will persist in the euro area at least through 2027.
Sources: Handelsblatt.