Watch CNBC's full interview with German central bank chief Joachim Nagel

First of all, it’s good news that inflation is coming down. So I think this is what we would like to achieve when we hike interest rates. Talking about the June meeting, I think the probability is increasing that we will see a rate cut in June, but there are still some caveats. So core inflation is still still high. Service inflation is high. For the June meeting, we will get our new projections. So we will get our new forecast and if there is a confirmation that inflation is really going down and we will achieve our target in 2025, as I said, probability is becoming higher that we will have her then this this rate cut in. If we’re here here for the June meeting, how worried are you about the wage data coming through still and potentially any movement in oil prices and in shipping given the events of the weekend in the Middle East? I guess wage prices, I think labour markets are strong in the whole eurozone, in Germany. So there is still some wage momentum. So for example, across wages in Germany on an annual basis are in the area of roughly around plus 4.5%. There’s still some, let me say, momentum from the wage side. So we have to look at that. But it looks like that even for wages, the wage development is slowing down. Oil prices, energy prices, if you see the oil price compared to last year’s roughly around 10% more gas price is lower. So this is uncertainty and as I what I said for the wages, the same for the energy side. We have to analyse this and this is a volatile environment. What sort of pressure could more volatile oil prices, energy prices bring to German industry when we’ve already seen manufacturing in the doldrums? I think we learned the lesson in 2022 I think. So we are exposed to all this. So but it’s not only true for Germany, but I guess also we learned our lesson from 2022. I think we, we we are more resilient than we were maybe two years ago. So but nevertheless I think if oil prices, if energy prices are going up, this is not only something for Germany, this is for for all of us. Let me just get you to sketch out the playbook. Then for the rest of this year, if we get a June card, what happens after that? There seems to be it’s a lack of transparency, really a lack of ability to forecast I think or what is beyond June. And even for June, as I said, there are some things we have to see, what are the numbers, what will the numbers tell us as a news story for our June meeting. And then we will see what does that mean for the July meeting. But frankly, speculating beyond June, this is in my understanding not very helpful. So some members of the Governing Council then speculating because some are willing to commit and forecast three to four rate cuts for this year. Yeah, I heard that, I read that. But as I said for me it’s important to think from meeting to meeting this was a good approach for the last two years and this is still my understanding how we should do monetary policy in here in the Eurozone. I understand you’re sounding very cautious here around rate cuts, but I do want to bring up the prospect of A50 basis point rate cut as a as a scenario because we are seeing fading growth. There’s a challenge as some are concerned about economic scars from here. If it turns out that the ECB is too late to cut, you didn’t cut in April. If you’re you’re too late with those rate cuts, could a catch up at 50 basis points be required at some point? I think first of all we have to wait for the tune meeting. I I will not speculate about further rate cuts. I will not speculate about 50 basis points. I think first I would like to learn something from the new data and then I will decide. Let me ask you then about policy Divergent because that is just pinging around as a phrase. Here at the IMS spring meetings. We’ve seen in particular from Jerome Powell suggesting that the data has been hot. We all have seen the data points from retail sales to CPI to jobs. If there is policy divergent from the US Federal Reserve this year, does that undermine ECB policy? I think first of all, the situation in the United States is different from the eurozone. So we have to do what we have to do in the eurozone. This this is our mandate. I think there are some indirect spillovers from the United States. I think we shouldn’t, we shouldn’t exclude this. But as I said, we have to look into the eurozone data and we are doing monetary policy and I’m really convinced that. So the Fed is doing what is necessary and we will do what is necessary. That said, do you think we are on the cusp of a new era in monetary policy where we do have some divergent to contend with again, Yeah, I think it is dependent on how the things are going in the United States, in the eurozone. I cannot exclude this, but I guess it’s it’s even here too. It’s too early to say is there is really this divergent just delve a little into wages, because Christine Lagarde was talking about early this year about being particularly vigilant around wage and profit data, but also pointed out that profits are now absorbing part of the rising labour costs and reducing their inflationary effects. As you waited out for the data, do you think we are getting some more evidence that corporates are willing to take their hit, they’re willing to absorb some of those costs. I think this is one of the reasons why I think that the TUNE data is so important. When we have to decide on monetary policy in June, then we have a better picture on wages other than we have more clarity. What does that mean for the profits of the companies? There could be a kind of a compensation coming from from from the profit side. But So what I trusted is so dependent on how the economy is doing over the rest of the year. There’s also some uncertainty. It looks like that the second-half of the year even in my country in Germany is getting it’s getting much better. So we we do have to wait here. Let me pressure on that the shape of the German economy, because it seems like it’s one of the most beaten up in Europe. Is it turning a corner? I think IMF was rather negative about the economy in Germany. Yes, I think we went through really tough times I think. But we shouldn’t forget that the last two years were good reason. After this unprovoked war of of Russia here. I think we went through really complicated times that energy prices went up. So we had to do a lot to really safeguard the German economy. But as I said, it is not as worse as some analysts say. I think the first half was pretty bad, but the second-half I’m a little bit more optimistic. I see that the service sector is doing very good. I see that private consumption is coming back, is profiting from the wage development. So it looks like that there’s a high probability at least for next year that the term that we are coming back. But it was said today also by our Finance Minister, there’s also the necessity for structural changes. This is also sure it’s not just the IMF 81st well forecasting very slim growth of 0.2% for this year. I’ve been talking to a host of German CE OS who say that industrial policy is not right for Germany. They’re arguing that there’s still so many barriers when it comes to Europe. What sort of reset is required if German industry is going to be as powerful in future as it has been in the past? I think there are many things. I think when I alluded to structural reforms, I think we talk about digitalization. We have our, let me say demographic development, so labor force is going down. So we have also to find here the the right answers. I think you have to talk about innovations, maybe you have also to to talk about tax policies. Those are many elements that so we we have to do our homework, but it was often like this in the past when there was pressure on the term industry. There’s also this capacity to change and I don’t want to sound too positive, but I see the first thickness that the German industry is changing. And so I have still the hope, the understanding that we can do much better over the next years. There are calls for greater integration in key sectors from finance to Ng telecommunications. This is coming out and Enrique letters analysis report this week when it comes to the banks and we know there have been attempts to consolidate German banks. Would a bigger German bank help when it comes to solving some of the problems in Germany? Maybe. I don’t want to speculate about a bigger German bank or maybe some, Let me say specific developments. What I can say is that we need better integration in the eurozone, in the European Union, capital markets union and banking union. I think we have many things we can do in the European Union to have to reduce this heterogeneity and so to really mobilize private capital, I think we are lagging here behind. So there’s a lot that we can do. And I hope that after the European election, I think the new Commission is really working on all this. What I just mentioned, funnily enough, as we talk about banking resilience, we’ve seen a lot of it and we’ve all been through the Mario Draghi school of transmission mechanism education. And what we’ve seen this time around is that the banks are still lending to the economy despite higher rates and and more pressure on the banks. Are the banks actually undermining the ability for you to keep policy restrictive at this stage because they’re still providing a bridge to the economy. So what I learned from the lending channel over this hiking cycle, I think this lending channel didn’t work differently from from past cycles. So I do not have enough evidence that there is something coming from the lending channel. What I’m not expected. So I do not see that I see that lending is coming back. I think this is in in economic terms this is good news. So I’m. I’m not worried here. Just finally can I get some more words on inflation? One minister was saying to me today that they’re winning the battle against inflation. How would you describe the battle against inflation this point winning the battle still in in the middle of a. So I I I don’t like to put this in this special dimension. I think this clear that we went through two tough years, inflation was super high. We in the Eurozone we have a clear mandate to fight against disinflation coming back to to price stability and good news is if it is the battle or not. What I see is that we will achieve our target with a high probability next year, and this is, for me good news.