European Central Bank Governing Council member Joachim Nagel has warned that while the central bank has probably ended its rate hiking cycle, it remains early to consider interest rate cuts. On Thursday, the ECB kept rates unchanged for the second consecutive policy meeting.
“There’s a high likelihood that after 10 rate increases, we’ve reached the interest-rate plateau,” Nagel stated during an interview. “In my view, it’s much too early to think about when rate cuts might possibly happen.” He added that policymakers would decide during the course of the year when to implement cuts upon reviewing inflation data, adding that inflation remains too high to consider rate cuts at present.
With the ECB only expecting inflation to fall to its 2% target by the second half of 2025, the central bank’s president Christine Lagarde insisted “We should absolutely not lower our guard.” According to the ECB’s latest forecast, inflation is expected to slow from a current level of 6.1% to 2.7% in 2024.