Bundesbank chief says an ECB hike next month is now very likely as inflation risks rise above September forecasts.
MoneyTurkey Currencies Desk | 3 November 2026
Key points
- Bundesbank President Joachim Nagel said a December ECB rate increase is very likely necessary.
- Inflation pressures are higher than expected in September and approaching the ECB’s adverse scenario.
ECB Governing Council member Joachim Nagel said on Tuesday that a December rate hike is very likely necessary because inflation pressures have risen above the bank’s September projections. Nagel, who also heads the Bundesbank, warned that the ECB can and must prevent an energy price spike from causing broad-based inflation. The comments align with remarks from other policymakers, including Bulgarian central bank chief Dimitar Radev, who said the October pause was only to assess evidence, not a signal that tightening is over.
What happened
Speaking in Berlin, Nagel said that from today’s perspective an interest rate hike in December is very likely necessary and that there seems to be little alternative unless the inflation outlook improves significantly. He noted that inflationary pressure is higher than expected in September and that the outlook is approaching the ECB’s adverse scenario. Radev echoed the view in Sofia, stating the inflation outlook has deteriorated since September and must be reflected in the assessment of the appropriate monetary policy stance.
The ECB left its key deposit rate unchanged at 2.5 percent last week. Financial investors currently price between two and three rate hikes over the coming year, expecting inflation to remain above the 2 percent target for years. Nagel added that the bank is still quite far from achieving its price stability mandate.
What is driving the currency
Nagel said the inflation surge is primarily due to energy prices, over which the ECB has no control, and that there is little evidence the increase is setting off second-round effects. He stressed that monetary policy is not the tool to address France’s budget issues. The euro was the strongest major currency against the yen in the latest session, according to the heat map data in the source.
Markets are watching whether the fresh hawkish signals from Nagel and Radev will shift pricing for the December meeting and whether the euro will extend its gains against the yen if rate differentials widen further.
Why it matters
A December hike would mark the ECB’s third rate increase this year. Traders now see the risk that the bank will keep tightening even after the October pause, which could support the euro against currencies whose central banks are on hold or easing. The comments also highlight the ECB’s focus on preventing an energy-driven spike from feeding into broader price pressures.
The remarks come as the euro trades at session highs versus the yen, with the pair reversing part of the previous day’s move lower to around 158.00 on the USD/JPY cross, according to the source.
What to watch
- Next ECB speakers for confirmation of December hike odds
- Energy price moves and their pass-through into core inflation data
- Euro-yen flows if rate differentials widen
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For information only. Not investment advice.
Sources
- FXStreet: https://www.fxstreet.com/news/ecbs-nagel-signals-december-rate-hike-as-inflation-risks-mount-202611031858
- Yahoo Finance: https://finance.yahoo.com/economy/policy/articles/bundesbanks-nagel-joins-ecb-chorus-180145490.html
- Bloomberg: https://www.bloomberg.com/news/articles/2026-11-03/ecb-will-probably-have-to-raise-rates-in-december-nagel-says
