ECB/Nagel: A Gradual Approach to Interest Rate Cuts is Essential

Foreks - Bundesbank President and ECB Governing Council member Joachim Nagel stated that Germany has entered a period of economic weakness, but central bank interest rates should be gradually reduced to completely eliminate inflationary pressures.

Nagel noted, "Germany has been stuck in a period of economic weakness for two and a half years. A recession is likely in the last quarter of this year."

He added that this would mean negative growth and that Germany would fall behind the rest of the bloc.

While weak growth pulls consumer prices down, Nagel also argued that risks persist, warning the ECB against rapid interest rate cuts. He cautioned that wage increases could still be very rapid, inflation remains high, and the new U.S. administration's trade policies could be inflationary, stating, "It is important to be cautious and to ease monetary policy only gradually, not too quickly."