WASHINGTON (Reuters) – Core inflation rates in the euro zone will begin improving in the coming months, but the European Central Bank still has a way to go with monetary policy, ECB policymaker Joachim Nagel said on Thursday.
“We expect core inflation will show first movements in the right direction before the summer break,” the head of Germany’s central bank said on the sidelines of an International Monetary Fund meeting in Washington.
He cited encouraging inflation data from the United States as showing that central banks’ interest rate hikes are working.
However, the United States began its rate hike cycle earlier, Nagel said, adding that he expected the ECB’s tightening cycle to be continued.
Data showing U.S. consumer prices rose less than expected in March bolstered the argument that inflation is decelerating, but the Fed is widely expected to raise rates again when it next meets in early May.
Nagel said he would not “commit to any order of magnitude of what might happen” at the next ECB interest rate meeting in May, but “what is clear is that monetary policy must continue to act decisively to restore price stability in a timely manner”.
The ECB has lifted rates at the fastest pace on record over the past year but recent turbulence on financial markets in the wake of prominent bank failures has raised doubts about its resolve to tighten policy much further.
While inflation in the euro zone dropped by the most on record in March, a measure that excludes energy and food prices, known by economists as core inflation and seen as a better gauge of the underlying trend, accelerated.
(Reporting by Christian Kraemer and Frank Siebelt, Writing by Rachel More and Miranda Murray, Editing by Friederike Heine and Christina Fincher)
