Bundesbank’s Nagel backs ECB readiness for September hike

The European Central Bank is well-positioned to respond to surging energy prices but should not rush into a rate decision before its September meeting, Bundesbank President Joachim Nagel said on Friday, a day after the central bank held rates steady while keeping the door open to further tightening.

Nagel's remarks, alongside hawkish signals from other Governing Council members, have reinforced market expectations that a second rate hike this year is coming at the ECB's September 10 meeting, as oil prices hover near $100 a barrel and natural gas costs continue to climb.

Nagel Urges Patience but Readiness

"The rate hike in June already put us in a good position from which we can monitor further developments closely," Nagel said in a statement. "We are seeing in the Middle East that the situation remains highly fragile. We are still facing intense uncertainty."kfgo

The Bundesbank chief stressed that the ECB should not pre-commit to any rate move and should instead analyze incoming data before the September meeting. The ECB raised its deposit rate by 25 basis points to 2.25% in June — its first hike since September 2023 — in response to inflation driven higher by conflict in the Middle East.global.morningstar+2

Thursday's Hold Sets Stage for September

The ECB left rates unchanged on Thursday as widely expected, with ECB President Christine Lagarde confirming that a rate hike was discussed but that the decision to hold was unanimous. The pause reflected the fact that the energy price surge has not yet generated second-round inflation effects.reuters+1

A Reuters poll conducted ahead of the meeting found that 70% of economists — 52 of 74 surveyed — expected one more rate hike this year, likely in September. Commerzbank analyst Antje Praefcke said the next move to 2.50% would come in September, confirming market expectations.fxstreet+1

Euro Holds Firm on Rate Expectations

The EUR/USD pair traded near $1.142 ahead of the decision on Thursday, supported by hawkish ECB communication and growing consensus around a September move. ECB staff projections from June see headline inflation averaging 3.0% in 2026 and 2.3% in 2027, well above the 2% target in the near term.tradingeconomics+2

The ECB's next policy meeting with fresh staff projections on September 10 will be the focal point for markets in the weeks ahead, with policymakers signaling they will act if the inflation outlook warrants it.