German Central Bank President: "ECB Monetary Policy Remains Restrictive Even After Interest Rate Cuts"

Joachim Nagel, President of the Bundesbank (Germany's central bank), stated regarding the slowdown in Eurozone inflation, "We should not prematurely celebrate and praise ourselves," adding that "even after the interest rate cuts, our (European Central Bank) monetary policy remains tight."

A photo of the euro sculpture in front of the European Central Bank (ECB).
[Image source=Yonhap News]

On the 4th (local time), in an interview with Frankfurter Allgemeine Zeitung (FAZ), President Nagel said, "Unless there is a major shock like Russia's invasion of Ukraine in February 2022, the inflation rate will continue to move toward the target of 2.0%," but also emphasized, "It is the central bank's duty to remain vigilant and watchful on the path back to price stability."

When asked whether the European Central Bank (ECB) would further cut interest rates at the monetary policy meeting on the 12th, he expressed a cautious stance, saying, "We will decide only when the meeting takes place so that we can fully understand all the indicators."

The ECB shifted its monetary policy for the first time in 1 year and 11 months by lowering the benchmark interest rate from 4.50% to 4.25% in June, but held rates steady at the July meeting.

Experts expect the ECB to cut interest rates once per quarter, including this month, until inflation stabilizes at the 2.0% target in the second half of next year. However, while Germany, the largest economy in the Eurozone, is experiencing a significant economic downturn, Southern Europe is enjoying a tourism boom, causing considerable divergence in regional economic conditions and intensifying debates over the future path of interest rates.