ECB's Nagel Advocates Gradual Rate Cuts as Neutral Approaches

European Central Bank (ECB) Governing Council member Joachim Nagel has advocated for a cautious and gradual approach to interest rate cuts, particularly as the bank nears the neutral interest rate, estimated between 1.8% and 2.5%. Speaking at the London School of Economics, he emphasized the importance of not acting hastily given the current economic uncertainties and stated that the ECB should be data-driven in its decision-making. Despite expectations for a rate cut in March, Nagel warned against relying too heavily on neutral rate estimates, describing them as risky for policymaking. Inflation is expected to return to the ECB's 2% target by mid-year, although some officials express concerns about potential price pressures. The ECB has already cut rates five times since June, with the current deposit rate at 2.75%. The next policy meeting is scheduled for March 6, where a cut to 2.5% is anticipated.