(Nov 3): Euro-zone economic data aren’t diverging from the European Central Bank’s (ECB) outlook but policymakers are keeping their options open, according to Governing Council member Joachim Nagel.
There was “absolutely no reason” to change borrowing costs last week, when the ECB kept its deposit rate at 2% for a third meeting, the Bundesbank president told the Table Today podcast in an episode released Monday.
“Since the last projections from September, the figures haven’t fundamentally changed,” he said. “In December, we’ll review the new projections — there’ll be new projections then — and then make a decision at this meeting based on that new data. So, we’re keeping all options open, and I think that’s the most appropriate approach given the many uncertainties.”
Following eight quarter-point reductions within a year, officials have kept interest rates unchanged since June. ECB president Christine Lagarde repeated Thursday that the ECB is “in a good place” and stressed it will do whatever is needed to stay in such a favourable position.
While inflation is hovering around the 2% target, the economy so far appears more resilient than feared to higher US tariffs and geopolitical tensions. Third-quarter expansion of 0.2% exceeded the expectations, and better-than-anticipated indexes of purchasing managers point to a good start to the final three months of 2025.
Still, some more dovish policymakers worry that growth could turn out softer than hoped, increasing the risk of a more prolonged undershoot of the 2% inflation goal. The ECB sees prices rising 1.7% in 2026 and 1.9% in 2027. Data last week, though, showed underlying pressures and services inflation remained stickier than expected.
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Commenting on Germany’s economy — Europe’s largest — Nagel touted its resilience and said it can “now embark on a moderate growth path” that will be enhanced by an increase in expenditure on infrastructure and defence.
“We’ll certainly see more growth next year,” he said. “If the spending on future investments is then properly directed, this fragile seedling can grow into something much bigger, and the economy can gain more momentum.”
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