By Ed Frankl
The European Central Bank can continue to lower interest rates at its meeting next week, but policymakers shouldn't dial back borrowing costs too quickly amid geopolitical uncertainties, the president of Germany's central bank said Wednesday.
"Given that the disinflation process is proceeding largely as currently projected, at this stage I would have no objections if we were to continue to reduce our policy rates," Bundesbank president Joachim Nagel said in a speech in Luxembourg.
However, the ECB shouldn't cut rates too hastily, he said, favoring reducing policy restriction at "a measured pace."
Inflation in recent months came in weaker than expected, and fears about economic growth in the 20-nation eurozone prompted the central bank to cut its key rate three times in four meetings since the summer.
And while the bloc's economy expanded more than expected in the third quarter of the year, underlying growth momentum remained subdued, cautioned Nagel, who sits on the ECB's rate-setting committee.
But there remains uncertainty regarding inflation projections through new geopolitical realities, he cautioned.
"One significant concern is the potential impact of the tariffs proposed by the incoming U.S. administration. I imagine we are all aware of the frequent announcements on social media, featuring new numbers and new countries," he added.
Energy prices and changes in consumer confidence also make inflation projections more unpredictable.
His comments come after ECB President Christine Lagarde told European Union lawmakers Wednesday that the euro area's economy is facing increasing uncertainty, with growing threats to international trade that will create more risks to economic growth.
Write to Ed Frankl at edward.frankl@wsj.com
(END) Dow Jones Newswires
12-04-24 1224ET
