(Bloomberg) -- The European Central Bank can envisage reducing borrowing costs if new forecasts and fresh data confirm consumer-price growth is headed back to 2%, Governing Council member Joachim Nagel said.

“Before lowering interest rates, we must be convinced on the basis of the data that inflation will actually reach our target in a timely and sustained manner,” the Bundesbank president said Tuesday in a speech in Berlin.

“This depends largely on the development of wages, productivity and profit margins,” he said. “If the favorable inflation outlook from March is confirmed in the June forecast and the incoming data supports this forecast, we can consider lowering interest rates.”

ECB officials look set to start cutting rates at their next meeting, in June, but what happens after is still up in the air. While several policymakers said recently that borrowing costs will probably fall further in the course of the year, how much easing they’ll deliver may depend on domestic price pressures and external factors including the conflict in the Middle East.

Nagel cautioned that the inflation outlook remains uncertain. “For example, wage growth could decline more slowly or productivity could recover less strongly than assumed in the forecast,” he said.

“I want to see that the data is so reliable that we can actually make the first interest rate cut in June,” Nagel told reporters later on Tuesday. “I think that will help us much more than speculating too early about the rest of the year.”

The Bundesbank chief spoke after figures showed economic activity picking up in Europe’s biggest economy, led by strong demand for services. But Nagel said he also sees positive signals in the country’s important manufacturing sector. 

“Sentiment indicators are improving significantly,” he said. “And what I hear from the German industry is that orders are developing relatively robustly, that momentum is picking up again.”

--With assistance from Arno Schütze.

(Updates with more Nagel comments starting in sixth paragraph.)

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