MNI BRIEF: Uncertainty Means Rocky Path To 2% - Buba's Nagel

The European Central Bank is on the path to 2% inflation, but high levels of economic and geopolitical uncertainty, coupled with more sensitive inflation expectations, mean nothing has been decided ahead of the ECB’s next decision, Joachim Nagel said in a speech on Tuesday. (see MNI SOURCES: Risks Tilt To Downside As ECB Mulls Path Below 2% )

Inflation is "within reach" of the 2% target, the Bundesbank president said, but core rate has recently risen again, with services in particular increasing sharply by 4%. “What does this mean in concrete terms for the next meeting in June? Will there be another interest rate cut? And as exciting as these questions are - unfortunately there is no answer to them yet.”

Following a meeting-by-meeting, data-dependent approach to ECB decision-making is therefore “more advisable than ever”, Nagel said, adding that it would currently be “impossible to reliably commit to a specific interest rate path.” Nagel said policymakers should pay particularly close attention to households’ and companies’ inflation expectations, which may now react more quickly or more strongly to future inflation shocks than in the past, and as the effects of US trade policy spill over into other jurisdictions.