Bundesbank President Joachim Nagel has indicated there is currently no pressing need for the European Central Bank (ECB) to further reduce interest rates. In comments to the “Frankfurter Allgemeine Zeitung” and the Italian newspaper “Il Sole 24 Ore” Nagel stated that the current interest rate level allows for observation of future developments.
The ECB’s Governing Council opted to hold interest rates steady at its September meeting, with ECB President Christine Lagarde refraining from providing specific guidance on future policy direction.
Nagel highlighted that the Eurozone inflation rate stood at 2.1% in August, only marginally above the ECB’s medium-term target of 2%. According to recent projections from ECB economists, inflation is anticipated to remain close to this 2% level over the coming one to two years.
He emphasized that the Eurozone has successfully navigated the double-digit inflation rates experienced in the autumn of 2022. He acknowledged the hardships faced, particularly for low-income earners, during that period, but now noted a return to price stability, which he described as “good news for consumers” across Germany, Italy and the wider Eurozone.
Nagel also addressed the abandoned plans for a new, multi-billion euro headquarters in Frankfurt. He revealed that the Bundesbank is currently undertaking a cost-benefit analysis for its historic main building. Decisions regarding whether to renovate and return to this building, or to pursue an alternative within Frankfurt, will be based on the results of this analysis.
While expressing personal admiration for the historic building, noting its impressive size and striking concrete façade, Nagel stressed that the Bundesbank’s strength lies in its employees, rather than its physical structure.