ECB’s Nagel backs rate hike next week as inflation hits 2026 high

Bundesbank President Joachim Nagel on Wednesday signaled clear support for a European Central Bank interest rate increase at the September 10 meeting, telling French daily Le Monde that markets "have a rather good understanding of how we are likely to respond at this stage."anews+1

Nagel noted that traders are pricing in a greater than 95% probability that the ECB will raise rates next week, adding that "inflation is not close to our medium-term target; it stands at around 3% rather than 2%." The ECB is widely expected to lift its deposit facility rate by 25 basis points to 2.50%, following a quarter-point hike in June that brought the rate to 2.25%.econostream-media+3

Inflation Accelerates on Energy Costs

The hawkish signal comes days after Eurostat data showed eurozone inflation surged to a 2026 high of 3.3% in August, up from 2.9% in July. Energy prices were the main driver, with energy inflation jumping to 14.3% from 10.3% the previous month — a consequence of elevated oil prices tied to the ongoing conflict in Iran. Core inflation, which strips out energy and food, edged down slightly to 2.4%.tradingeconomics+1

Among major economies, Spain posted the highest inflation at 4.5%, while Germany recorded 2.9% and France 2.7%.english.news

Caution Beyond September

While Nagel endorsed the coming rate move, he declined to offer guidance on subsequent decisions. "Beyond this September meeting, I am cautious about giving any indication of what comes next," he said, citing volatile energy prices and heightened uncertainty. Reuters reported in late August that ECB policymakers had little appetite to signal further tightening after September, even as some analysts see roughly even odds of a December hike to 2.75%.reuters+3

The ECB resumed raising rates in June after cutting them eight times between September 2023 and early 2026, a reversal driven by the Iran conflict's impact on energy markets. The Governing Council's next rate-setting meetings are scheduled for October 29 and December 17.cnbc+1