The European Central Bank’s next decisions will depend heavily on how energy prices evolve, Bundesbank President Joachim Nagel told CNBC.
The comments came a day after the ECB raised its key interest rate by 25 basis points to 2.5%. Nagel said the next moves would hinge on the path of energy prices and the broader inflation picture over the coming weeks, and possibly over the next month.
At the time of the interview, oil prices remained elevated, with global benchmark Brent crude and U.S. WTI both trading above $100 a barrel on Friday morning. European gas prices were also under pressure, with Dutch TTF futures reaching their highest level since 2022.
Nagel said rates are now at the upper end of neutral territory, where monetary policy is neither stimulating nor restraining economic growth. Even so, he did not rule out the possibility that the ECB may need to move into “mild restrictive territory.”
Energy prices remain the key variable
Asked whether one or two more rate hikes could still come in the current cycle, Nagel said it was too early to speculate. He noted that energy prices rose last week and that crude oil was nearing $110 a barrel.
He also said markets had seen significant volatility over the past month and that the ECB’s decision the previous day reflected its forecast at that point.
Nagel added that it is still unclear how energy prices will behave in the coming weeks and months, and said he would make his next assessment when ECB policymakers meet again.
At the same time, the Bundesbank chief said he was not worried about relatively low European gas storage levels going into winter. In his view, the current situation is not comparable to the 2022-2023 energy crisis because Europe now has more options to buy LNG.
