ECB Urges Nagel to Exercise Caution in Interest Rate Policy Changes

According to Bundesbank President Joachim Nagel, the European Central Bank (ECB) should approach policy adjustments with caution. During a panel discussion in Washington, Nagel emphasized the importance of not rushing in response to calls from some colleagues at the ECB for more rapid and significant interest rate cuts.

Nagel pointed out that the ECB needs to base its decisions on incoming data, stating that the central bank's actions should be data-driven. He mentioned that various factors, including the upcoming U.S. elections, new inflation figures, impending economic forecasts, and other indicators, will play a crucial role in shaping the ECB's policy decision in December.

Investors have already fully priced in a 25 basis point rate cut for December, which would mark the fourth such adjustment in 2024. Additionally, the likelihood of the ECB opting for a more aggressive 50 basis point cut is seen at 40%. This situation is partly influenced by the dovish statements made by ECB officials earlier in the week.