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The European Central Bank must be resolute in its response to inflation rates that could reach the double digits later this year, according to Bundesbank President Joachim Nagel.
“If the data trend continues, more interest-rate increases have to follow -- that’s already agreed in the Governing Council,” he said Sunday. “We have to be determined, in October and beyond.”
The ECB raised rates by an historic three-quarter point this month and economists predict another such move may follow as policy makers confront record inflation. Nagel argued borrowing costs are still “somewhat off the levels” needed to calm price pressures.
“We must bring inflation back under control,” he said. “We mustn’t let up, even if the economy worsens.”
Policy makers’ job is being complicated by a quickly deteriorating outlook and threats of energy rationing this winter. A recession still isn’t part of the ECB’s baseline scenario, even though staff have cut their growth projections for the next two years.
Speaking at the German central bank’s open day in Frankfurt, Nagel said momentum will likely slow in the third and fourth quarters but expressed confidence that the economy can avoid a steep slump. His remarks echo comments made Saturday at the same event.
(Updates with additional comments starting in third paragraph)
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