Nagel Says ECB Will Probably Have to Hike Again as Energy Prices Bite

Joachim Nagel, who sits on the ECB Governing Council and runs Germany's Bundesbank, said Friday the central bank will probably have to raise interest rates again. Speaking at the Siemens Banking Conference, he argued the outlook has deteriorated since September, with energy prices moving well above the projected path. He said the ECB is now approaching the adverse scenario sketched out in those September projections, which is one reason the Governing Council sees inflation risks leaning to the upside.

Underlying inflation is still too high, Nagel added, and short-term inflation expectations have risen. He warned that every month of elevated inflation raises the risk of second-round effects creeping into the economy.

He isn't alone on the Governing Council. Ireland central bank governor Gabriel Makhlouf said Wednesday that upside risks to inflation persist, largely because of energy price spikes, and flagged tighter financing conditions as yields climb. Nagel and Fabio Panetta are among the colleagues who have spoken in favor of a December rate increase to fight rising prices.

Fresh French data underlined the pressure. INSEE's final October report on Friday confirmed annual inflation at 3.4%, with consumer prices up 0.4% on the month. Energy prices rose 1.9% — gas alone jumped 5.5% — while services gained 0.4% and manufactured goods 0.2%. Food prices dipped 0.4% and tobacco held steady.

Over in the US, Chicago Fed President Austan Goolsbee said Thursday that inflation is well above the central bank's target and not a one-off. He called it the third or fourth month in a row of worrying readings and told the Yahoo Finance Invest 2026 event the Fed should be sober-minded.

Nagel's rate warning came two days after he said Germany's economy is headed for a stronger recovery than the Bundesbank forecast in the summer, with growth of 1.3% seen in 2026 and 1.1% in 2027 and third-quarter GDP up 0.2%. He cautioned that an encouraging outlook shouldn't make policymakers complacent.