FRANKFURT, Feb 25 (Reuters) - Joachim Nagel, an ECB policymaker, stated on Tuesday that the European Central Bank could further reduce interest rates if inflation reaches its 2% target this year, as anticipated. Nagel described the price outlook as "encouraging."
Following a decline in inflation from double digits after Russia's 2022 to slightly over 2% in recent months, the ECB is expected to temporarily cut rates next week.
Nagel highlighted that recent data, particularly regarding price growth, indicated a probable achievement of the ECB's target for this year and emphasized the possibility of lowering interest rates in such a scenario.
Alongside the positive outlook on prices, Nagel also cautioned about "persistently elevated core inflation and the undiminished strength of services inflation."
Regarding the Bundesbank, despite facing continued losses due to past bond purchases causing high inflation, it has a solid balance sheet with revaluation reserves totaling 267 billion euros, allowing for unrestricted actions, according to Nagel.
In 2024, the German central bank recorded a loss of 19.2 billion euros, erasing reserves and leading to an expectation of ongoing losses, thus suspending dividends to the German federal government.
Nagel emphasized the Bundesbank's ability to operate independently, despite the financial challenges.
($1 = 0.9553 euros)