Inflation in the euro zone is declining, but the job is not yet done, ECB’s Nagel told Reuters

FRANKFURT (Reuters) – Inflation in the euro zone is easing, but the European Central Bank must remain vigilant and ensure price growth remains at the 2% target even in the medium term, Bundesbank President Joachim Nagel said on Tuesday.

The ECB has cut rates twice this year and further easing in both October and December is almost fully priced in, suggesting investors are seeing a steady decline in rates after they hit record highs.

“Fortunately, inflation expectations are now well anchored again,” Nagel said in a speech. “Even though inflation is likely to rise again in the coming months due to base effects, inflation is fundamentally falling.”

Several policymakers have already called for or hinted at a rate cut on October 17 and only a few of the 26-member Governing Council have withdrawn, indicating that a cut will be relatively uncontroversial and that the real discussion now turns to what happens in December must happen. .

Nagel warned that the battle against inflation has not yet been won and also warned that underlying price pressures are still too high, while core inflation is still well above 2%.

“Core inflation and especially the development of services prices are not yet satisfactory,” Nagel said. “We must therefore remain vigilant so that inflation remains at 2% in the medium term.”