Nagel Backs September Rate Hike as Inflation Remains Elevated

European Central Bank (ECB) Governing Council member Joachim Nagel signaled support for another interest rate hike in September, as inflation remains above the bank's medium-term target.

Nagel, who also heads Germany's Bundesbank, told French daily Le Monde that financial markets are pricing in a high probability of a rate hike at the upcoming meeting on September 10. He noted that markets have a 'rather good understanding' of how the ECB is likely to respond.

The ECB is widely expected to raise its deposit facility rate by 25 basis points to 2.50%, following a quarter-point increase in June.

Nagel emphasized that inflation is not close to the bank's target of 2% and will only return to this level over the medium term if interest rates are higher.