On Wednesday (November 22nd) local time, Joachim Nagel, a member of the European Central Bank's management committee and German central bank president, stated that the European Central Bank's interest rates are approaching their peak, but the possibility of another rate hike is not ruled out.
At last month's interest rate meeting, the European Central Bank suspended interest rate hikes for the first time in more than a year. Previously, the European Central Bank raised interest rates 10 times in a row, raising the three key interest rates, namely the refinancing rate, marginal lending rate, and deposit mechanism rate, to 4.50%, 4.75%, and 4.00%, respectively.
Nagel said on Wednesday, "I do believe that we are close to the level of terminal interest rates we believe. I believe that interest rates will remain unchanged for a period of time
After the European Central Bank suspended interest rate hikes last month, most observers predict that the current rate hike cycle has ended and policy makers will not raise interest rates again. Although European Central Bank President Lagarde stated earlier this month that there will be no interest rate cuts in the coming quarters, the market is not convinced and is betting that the central bank will start cutting rates as early as April next year.
However, hawkish officials such as Nagel oppose this view. Nagel warned that there are still some risk factors that may trigger a new round of inflation, so no one knows what will happen next.
The final data released by the Eurostat last week showed that the year-on-year growth rate of CPI in the eurozone in October significantly decreased to 2.9%, the lowest level in two years; In October, the core CPI (excluding volatile factors such as food and energy) increased by 4.2% year-on-year.
The aggressive rate hike by the European Central Bank has increased the likelihood of a recession in the eurozone economy. European Central Bank Vice President De Jindos warned on Wednesday that investors' expectations for a soft landing in the economy may be wishful thinking.
However, Nagel is more optimistic about the economic outlook, stating that he is not worried that the eurozone may fall into a hard landing.
In the autumn forecast released last week, the European Commission lowered its GDP growth forecast for the eurozone to 0.6% in 2023 and 1.2% in 2024.