ECB's Nagel: December Rate Hike Looks Likely as Inflation Worsens

Joachim Nagel isn't waiting for the December meeting to tip his hand. The Bundesbank president and ECB Governing Council member said Tuesday that a rate hike in December is, from today's vantage point, very likely necessary. He made the call at the Bundesbank's capital reception in Germany, pointing to an inflation outlook that has only gotten uglier since the central bank's September projections.

Back in September, the ECB's baseline scenario already penciled in another rate increase. Nagel's message now is that the picture has shifted further in the wrong direction since then. The inflation outlook, in his words, has deteriorated.

The driver? Conflicts in the Middle East, which Nagel said have driven energy prices enormously higher. He's blunt about the limits of his own toolkit here: there is little monetary policy can do to stop those spikes once they hit.

What the ECB can fight is the spread. Nagel flagged the risk that high energy costs bleed into broader price increases, though he noted wage demands haven't yet chased energy prices upward. That's the line he's watching — and the reason he says action is still needed.

Nagel's comments land as one of the clearest signals yet that the ECB's next move is likely up, not sideways. All eyes now turn to the December meeting, where his Governing Council colleagues will either back his read or push back against it.