ECB keeping its options open for July, Nagel says

FRANKFURT: The European Central Bank will keep all options open for its July policy meeting and will be ready to act again if necessary to stop an Iran-war-induced energy price surge from spreading, Bundesbank President Joachim Nagel said on Friday.

The ECB raised interest rates on Thursday, becoming the first major central bank to tighten policy on the oil price jump after inflation shot past 3% and even underlying price growth, which filters out energy moves, rose well above its 2% target.

“The Governing Council will be gathering for its next monetary policy meeting in July,” Nagel said in a statement.

“We are keeping all our options open and are ready to respond once again, should we have to.”

Nagel, a potential candidate to succeed ECB President Christine Lagarde next year, said that Thursday’s rate hike was necessary as inflation was now spreading beyond energy and starting to affect the price of other goods and services.

“The supply shock triggered by the war in the Middle East is proving to be strong and persistent,” he said.

“That is why we cannot simply ‘look through’ it.”

Sources close to the discussion earlier told Reuters that a July rate hike was not policymakers’ base case, but a move could still happen should energy prices rise further or the ECB face yet another negative inflation surprise.

“The Governing Council has shown determination,” Nagel said.

“That helps prevent inflation expectations from becoming unanchored.”