ECB's Nagel Sees September Rate Hike as Warranted Amid Uncertainty

European Central Bank (ECB) Governing Council member Joachim Nagel believes that a rate hike next week is justified due to inflation at around 3% and the assumptions underlying the ECB's June projections. In an interview with French daily Le Monde, Nagel stated that 'currently, inflation is not close to our medium-term target; it stands at around 3% rather than 2%.' He also mentioned that according to the June projections, inflation will return to 2% over the medium term only under the assumption of higher interest rates.

Nagel emphasized that markets were pricing a more significant rate hike, with over 95% probability of an increase in September. However, he cautioned about giving any indication beyond September, stating 'there is lots of uncertainty, the situation is uncomfortable.' He also mentioned that the ECB's meeting-by-meeting approach will serve them well in the future.