Bundesbank Urges Flexibility Amid Eurozone Inflation Uncertainty

The president of the Bundesbank, Joachim Nagel, has stressed the need for flexibility in monetary policy due to the high uncertainty surrounding inflation in the eurozone. Speaking on Monday, Nagel, who is also part of the European Central Bank's (ECB) Governing Council, emphasized that geopolitical events continue to heavily influence inflation prospects.

Nagel noted that the ECB's approach of making data-driven decisions at each meeting has been effective and should continue. He highlighted that inflationary pressures in the eurozone are expected to remain intense, even excluding energy and food price volatility, with risks predominantly tilted upwards.

However, Nagel pointed out that there are no conclusive signs yet that inflation has fully translated into price and wage formation. Long-term inflation expectations remain aligned with the ECB's 2% target. He affirmed that the ECB's recent decisions to raise interest rates by 25 basis points in June and September, bringing the reference rate to 2.5%, were made with both caution and firmness.