ECB nears terminal rate; Nagel confident in eurozone economy

MILAN – At a recent event in Milan, Joachim Nagel, President of the Bundesbank, indicated that the European Central Bank (ECB) might be nearing its terminal rate for interest hikes, signaling a cautious approach to monetary policy in the face of persistent inflationary pressures. His comments come at a time when market participants have been speculating about potential rate cuts by the ECB as soon as April.

Nagel expressed a positive outlook on the euro area’s economic resilience and emphasized the need for updated fiscal policies within the European Union. He argued that more consistent fiscal rules among member states are crucial for maintaining stability. This perspective aligns with that of ECB President Christine Lagarde, who also foresees stable interest rates in the near term, diverging from market expectations of a reduction.

Despite concerns from ECB Vice President Luis de Guindos about the likelihood of a soft economic landing, Nagel remains optimistic. He suggested that adjustments to fiscal regulations could provide a framework for stability. Finance ministers are currently engaged in discussions to find a compromise on fiscal rules that take into account lessons learned from past financial crises.

As central bank officials navigate through economic uncertainties and strive to balance growth with price stability, their decisions on monetary policy will continue to be closely watched by global markets.

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