(Bloomberg) -- The European Central Bank should probably wait until September for any subsequent interest-rate cut after it begins reducing borrowing costs in June, Bundesbank President Joachim Nagel said.

Speaking with Bloomberg Television, the hawkish German monetary chief cautioned against following up next month’s prospective easing too quickly. 

“If there’s a rate cut in June, we have to wait, and I believe we have to wait till maybe September,” he said in an interview on Friday at a meeting of Group of Seven counterparts in Stresa, northern Italy.

The comments by Nagel come less than two weeks before for a crucial meeting, at which officials are widely expected to lower borrowing costs for the first time since concluding an unprecedented tightening campaign. What happens after, is less clear – with stronger growth momentum, sticky inflation and stubborn wage growth reducing the case for a series of quick back-to-back interest rate cuts.

Most policymakers have been mute on what happens after June, though Executive Board member Isabel Schnabel suggested last week that she is opposed to July action.

Markets are still betting on a first quarter-point cut in next month, with a 60% probability of another move in September. The chance of a third reduction later this year is now seen as one-in-three, a shift from last week when three cuts were virtually fully priced.

Cutting at those three meetings would allign ECB steps with its timetable of compiling forecasts on a quarterly basis. That would give policymakers a more thorough analysis on which to base their decisions, though they didn’t pay heed to such a schedule when tightening.


New ECB data on Thursday showed a key gauge of euro-area salaries unexpectedly failed to slow at the start of 2024 — a warning sign to policymakers counting on a slowdown to maintain the retreat in inflation. Negotiated wages increased 4.7% from a year ago — matching a record set in the third quarter of last year. 

“It was not a surprise to me that wage data came out pretty strong,” Nagel said. “Wage data is often kind of a lagging indicator so what we saw in the latest data is related to inflation rates of the past.”

He highlighted that “a lot of one off payments are included in the current wage data,” adding that “I believe that there’s some relief coming.”

“But nevertheless wage data are still strong, so we have to keep our vigilance when it comes to that,” he said.

Earlier this week, ECB President Christine Lagarde was quoted as saying that she’s confident that inflation is “under control,” though also refusing to commit to a certain rate path after a likely first cut in June. 

Nagel said that what he expects “for the next months is inflation coming down further — core is coming down, headline came down already. So the probability is increasing that in 13 days we will see the first rate cut in the euro zone.”

Nagel’s Estonian counterpart Madis Muller told Bloomberg separately on Friday that the jump in euro-zone pay doesn’t derail the ongoing retreat in inflation and won’t stop the ECB from lowering rates in June.

--With assistance from Toru Fujioka, Ragnhildur Sigurdardottir, Caroline Connan, William Horobin, Kamil Kowalcze, Tom Rees, Jorge Valero and Alice Gledhill.

(Updates with inflation comments in penultimate paragraph)

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