- Monetary policy will maintain its vigilant stance
- From a geopolitical perspective, the past few weeks have been characterized by hopes and disappointments
- From a monetary policy perspective, it remains adivsable to react with caution, but to act decisively if necessary
- Interest rates are at appropriate level after June’s decision
ECB policymaker Nagel said the ECB should maintain a vigilant monetary policy stance, arguing that while caution remains appropriate amid an uncertain geopolitical backdrop, policymakers must be prepared to act decisively if necessary.
Nagel said the recent weeks have been marked by both hopes and disappointments from a geopolitical perspective, highlighting the continued uncertainty around the US-Iran war. He stressed that the ECB should continue to react cautiously to incoming data while retaining the flexibility to respond swiftly if inflation or economic conditions were to shift materially.
On monetary policy, Nagel said the current level of interest rates remains appropriate following the ECB’s June policy decision, signalling confidence that the central bank’s current stance is well calibrated. His remarks suggest the ECB sees no immediate need to adjust borrowing costs but remains attentive to evolving risks that could alter the inflation outlook.
Traders are pricing in just an 18% chance of a rate hike at the July meeting, confirming the ECB pause at least until September when the central bank will have more economic data at hand and the US-Iran war will be hopefully over.
This article was written by Giuseppe Dellamotta at investinglive.com.