The European Central Bank has room to cut its interest rates further if inflation eases to its 2% goal this year as it expects, ECB policymaker Joachim Nagel said on Tuesday, adding the outlook for prices was "encouraging".

Nobody knows where the neutral rate is. But I guess the most important message is that we see in the Governing Council that inflation will come back to our target maybe by midst of this year. And this is good news.

The European Central Bank is getting closer to a pause in interest cuts since it is no longer clear that policy remains restrictive and energy price surges raise inflation risks, ECB board member Isabel Schnabel told the Financial Times.

The European Central Bank could continue to reduce interest rates as eurozone inflation approaches its target, Bundesbank President Joachim Nagel said.