Bundesbank President Joachim Nagel said the European Central Bank (ECB) would act if needed as energy costs could keep euro-area inflation climbing in coming weeks, according to Bloomberg remarks reported by FXStreet and Econostream.
Econostream quoted Nagel as saying the ECB would “act decisively if necessary.” His reported remarks did not identify a particular policy move; the central bank’s stated medium-term target is 2%.
Eurostat’s final figures put annual euro-area inflation at 3.8% in September, up from 3.2% in August. Energy inflation was 18.9% year over year, compared with 14.3% in August.
On Oct. 29, the ECB kept the deposit facility rate at 2.50%, the main refinancing operations rate at 2.65% and the marginal lending facility rate at 2.90%. It said future decisions would reflect new economic information considered at each meeting, without a predetermined path for rates. EconoTimes covered the ECB’s rate decision as annual inflation reached 3.8%.
Nagel’s remarks signal that the ECB may act if conditions require, but do not amount to an announcement of a rate increase. The ECB said it would assess price trends and other evidence meeting by meeting, leaving future moves open.
The central bank warned a stronger or more persistent energy shock could keep inflation elevated while holding back growth. It said additional disruptions to energy supplies might squeeze real incomes and dampen household consumption and investment. The ECB also noted little movement in the measures it uses to track underlying price pressure and no substantial shift in pay behavior so far.
Eurostat is scheduled to release its flash estimate for October inflation on Wednesday, Nov. 4. The ECB’s next policy meeting is set for Dec. 16-17, with the inflation update due before the Governing Council’s next scheduled rate decision.
