While price gains are hovering around the 2pc target and should stay there over the medium term, the aftermath of the crisis is “still noticeable in some case,” the Bundesbank president said yesterday in prepared remarks for a discussion in Frankfurt.
Mr Nagel, seen as one of the ECB’s more hawkish policymakers, cited surveys showing people still worry about further increases in euro-area prices, which grew at a peak of 10.6pc in October 2022 after Russia attacked Ukraine,
“The ECB is of course keeping an eye on this, as well as on the continued strong services inflation,” he said.
The ECB is expected to keep interest rates unchanged for a fourth meeting in December.
But a potential downward revision to the 2027 inflation outlook – due to a likely delay in the European Union’s carbon-pricing regime – could encourage more dovish officials to argue for a cut.
Increases in food and services prices, however, still top 3pc – supporting the majority’s cautious view on further easing following the eight-quarter point rate reductions to date.
Mr Nagel said yesterday that the ECB is “in a good position” and should continue to take decisions based on data and flexibly meeting by meeting.
“In December, we’ll have more data, new projections for the next two years and – for the first time – 2028,” he said.
“We’ll then see more clearly whether the monetary-policy stance remains appropriate.”
He again downplayed worries about this year’s rally in the euro – seen by many doves as a key downside risk to the inflation outlook.
“The euro’s current valuation level isn’t worrying,” Mr Nagel said, adding that the dollar exchange rate, at about €1.16, isn’t far off its historical average.
In Ireland the latest consumer price index, for October, from the Central Statistics Office showed overall consumer prices rose by 2.9pc in the previous 12 months.
Food and non-alcoholic beverages prices are up by 4.5pc in the year.
The cost of a white sliced pan is up 7c to €1.68 in October this year compared with the same month last year.
Bloomberg