Joachim Nagel, Bundesbank president and member of the European Central Bank's Governing Council, said on the 11th that if the surge in energy prices caused by the war continues, the ECB may need to raise interest rates further to a level that gently restrains the economy. He noted that the ECB has already raised its policy rate to the upper end of the neutral range, which neither stimulates nor restrains the economy, but said further increases may be necessary. In an interview with CNBC, Nagel said, "I would not rule out that we have to enter mildly restrictive territory, but that depends very much on how energy prices develop and perhaps on how the inflation picture changes over the next month or so."
Nagel says ECB may need to raise rates further into mildly restrictive territory, signaling higher policy rates.
Prospect of further ECB rate hikes pushes German 10Y bond yields higher.
Nagel's openness to further ECB hikes supports the euro versus the dollar.
