The European Central Bank (ECB) should refrain from hasty interest rate cuts as inflation remains elevated and uncertainty persists, Bundesbank President Joachim Nagel said in an interview published Friday.
Speaking to the German financial newsletter Platow Brief, Nagel emphasized the importance of cautious monetary policy despite the ECB’s recent rate cuts. “We should therefore not rush into anything on the path to monetary policy normalisation,” he stated.
The ECB has lowered rates four times since June, with inflation dropping from double digits in late 2022 to just above its 2% target. However, Nagel pointed to ongoing challenges, such as high services inflation and global uncertainty—possibly hinting at the implications of Donald Trump’s upcoming return to the White House.
While Nagel acknowledged the ECB’s December discussions on a larger, 50-basis-point rate cut, he defended such deliberations, saying, “That’s part of it.”
Bitcoin in Reserves? Not a Good Idea
Nagel dismissed a proposal by Christian Lindner, former German finance minister and Free Democratic Party leader, to include Bitcoin in the reserves of the Bundesbank and ECB.
“This worries me because it gives the impression that an asset is being given some kind of government seal of approval,” he explained. “A currency reserve must be safe, liquid, and transparent. None of this applies to Bitcoin.”
Basel III Rules Still Expected
Nagel expressed confidence that Basel III banking rules, designed to strengthen financial stability, would be implemented in both Europe and the U.S., despite concerns over potential dilution by U.S. regulators.
“I assume that Basel III will be finalised on both sides of the Atlantic,” he said, stressing the need for a unified European stance.
Meanwhile, the Bank of England announced it would delay its adoption of the rules by one year, pushing implementation to January 2027.