In brief

• Joachim Nagel, president of the Bundesbank, believes the ECB will most likely raise interest rates in December.
• The reason is deteriorating inflation prospects in the euro area.
• Higher rates could raise the cost of loans for businesses, so it is worth reviewing financing plans before the end of the year.

The Bundesbank president sees a hike

Joachim Nagel, president of the German central bank and a member of the ECB Governing Council, assessed that deteriorating inflation prospects make an interest rate hike in the euro area in December a foregone conclusion (Szef Bundesbanku uważa, że EBC będzie musiał podwyższyć stopy w grudniu – Puls Biznesu). As German media report, Nagel believes the European Central Bank is already heading in this direction for its next meeting next month (Teuerungsrate - Bundesbankpräsident Nagel erwartet höheren EZB-Leitzins im Dezember – Deutschlandfunk) (ECB likely to raise rates in December, says Nagel – Investing.com).

Why inflation calls for action

Nagel's remarks suggest that the central bank must respond to accelerating price pressure rather than merely observe it. Raising interest rates is the ECB's basic tool for curbing price growth: more expensive credit usually slows demand and spending.

What it means for businesses

If the ECB raises rates in December, the cost of working capital loans, investment loans and leasing may rise, and variable-rate loans will reprice faster. For small businesses, this means reviewing financing plans and repayment schedules before the end of the year (EZB-Kurs: Nagel: Zinserhöhung im Dezember wahrscheinlich – ZEIT ONLINE).

The decision in December

Nagel's statement is the assessment of one member of the Governing Council, and the final decision rests with the Council as a whole. More than a month remains until the December meeting, so the forecast may change as new euro area inflation data arrive.