Bundesbank President Calls for Braking on Interest Rates: ECB Should Not Rush to Further Cut Interest Rates

On Monday (June 16) local time, Joachim Nagel, a member of the European Central Bank's Governing Council, stated that despite the eurozone's inflation rate reaching the target level, the ECB should not rush to further cut interest rates.

Nagel, who is also the President of the Deutsche Bundesbank (Germany's central bank), said in a speech in Frankfurt, "We should continue to make decisions on a case-by-case basis based on the data from each meeting, rather than rushing into any actions."

Preliminary statistical data released by Eurostat earlier this month showed that the eurozone's inflation rate rose 1.9% YoY in May, down from 2.2% in April and below the ECB's 2% target. The core inflation rate, excluding energy, food, and alcohol and tobacco prices, was 2.3%.

Two days later, the ECB lowered its three key interest rates by 25 basis points each, marking the eighth interest rate cut since June 2024. The deposit facility rate, main refinancing rate, and marginal lending rate were reduced to 2%, 2.15%, and 2.4%, respectively, the lowest levels in at least two years.

Nagel pointed out, "The current interest rate levels provide us with good conditions to respond to various economic changes." He said there is currently no reason to further ease monetary policy and still recommended adopting a prudent monetary policy and communication strategy.

He added that the current monetary policy no longer seems to be "restrictive," meaning that interest rates will no longer further suppress inflation by curbing economic activity.

Despite inflation data suggesting that prices may stabilize at the 2% target level, Nagel emphasized that the ECB still needs to closely monitor price stability amid the current uncertain backdrop, including the situation in the Middle East.

Last week, Boris Vujcic, another member of the ECB's Governing Council, also stated that the central bank should wait until at least September before delving deeper into discussions on interest rate actions. The Governor of the Croatian National Bank said, "We feel we are in a very good position now, and it is worth waiting for more economic data."

Vujcic said, "In my view, obtaining another forecast and then deciding on the next steps, hopefully with clearer trade relations by then, would be preferable."