European Central Bank policymakers are likely to raise interest rates at their December meeting, Bundesbank President Joachim Nagel said in Berlin. In remarks prepared for delivery, he said a move would probably be necessary unless the inflation outlook improves substantially.
The ECB’s Governing Council is due to meet on December 17. At its meeting last week, it left the deposit rate—an important benchmark for banks and savers—at 2.5%. The central bank has already raised rates twice this year in response to rising inflation, driven mainly by higher energy prices.
Eurozone consumer prices were 3.8% higher in September than a year earlier, their steepest annual increase in three years. Nagel said inflationary pressure now appears likely to exceed the ECB’s September expectations. He also warned that repeated energy price increases could push up the cost of other goods and services and feed into wage demands.
Higher interest rates can make borrowing more expensive, restraining demand and helping to curb inflation. They can also weigh on investment and economic activity. The ECB’s medium-term inflation target for the eurozone is 2%.
Sources: Handelsblatt.