Bundesbank President Joachim Nagel expressed concerns about persistent inflation during an interview at the European Central Bank's Forum on Central Banking in Sintra, Portugal. He indicated that the energy price shock from the ongoing geopolitical tensions is still affecting the economy, suggesting that inflation rates could remain significantly above target levels.
This warning comes in the context of a fragile ceasefire between the U.S. and Iran, with President Donald Trump announcing meetings between delegations from both countries in Doha, Qatar. Earlier this month, the European Central Bank raised its key interest rate for the first time since 2023, attributing this decision to inflationary pressures linked to the U.S.-Iran conflict.
Nagel acknowledged that while the rate hike was appropriate, the future trajectory of monetary policy remains uncertain due to the unpredictable situation in the Middle East. He emphasized the need for patience, stating that the current circumstances are still unclear and that the stability of the region is yet to be determined