Introduction
The European Central Bank (ECB) has reached a neutral interest rate level, allowing greater flexibility in its monetary policy, according to ECB policymaker Joachim Nagel.
Context
On June 8, Nagel, who also serves as the president of Germany's central bank, stated during a live radio interview that the ECB's current policy position is non-restrictive. This shift follows the ECB's decision on Thursday to lower borrowing costs for the
eighth time in a year, signaling a potential pause in upcoming policy adjustments as inflation aligns with the target of
2%.
Developments
Nagel emphasized that the ECB is no longer pursuing a restrictive stance, which is critical for promoting economic growth. “We are no longer restrictive. I believe that we can now take the time to look at the situation first. We now have maximum flexibility at this interest rate level,” he noted. Since last June, the ECB has reduced interest rates by
2 percentage points to support a eurozone economy already under pressure from unstable U.S. economic and trade policies.
Conclusion
Nagel's comments reflect a strategic shift within the ECB, indicating that the central bank is adopting a more cautious approach as it navigates the complexities of the eurozone economy. With interest rates at a neutral level, the ECB is positioned to assess economic conditions more thoroughly before making further adjustments.
