The European Central Bank (ECB) It has controlled inflation, but it should not be complacent due to the extremely unstable geopolitical environment, according to Board member Ioakim Nagel.
Speaking on the sidelines of the ECB’s annual conference in Sintra, Portugal, Nagel said on Tuesday (1.7.2025) on Bloomberg television that recent fluctuations in energy prices due to Israel’s war with Iran emphasize that the ECB should be careful. “In the current situation, we are in calm waters,” the Bundesbank president said, but “complacency is not the way we should see it.”
Investors and analysts are awaiting indications of what will happen to interest rates, as officials reduced them for an eighth time in June, and President Christine Lagarde said the relaxation campaign is coming to an end. While some policy -making managers are in favor of more reductions to stimulate the economy, others are urging caution – citing prices afterwards.
The July meeting is expected to lead to the cessation of monetary relaxation. Nugel said he was expecting the next round of three -year financial forecasts in September to decide where the cost of borrowing should move beyond that. “We must be prepared for everything,” he said. “I’ll see what the data will tell me in the fall and then we’ll see.”
The data is later expected to show inflation in the eurozone in June – at 2% from 1.9% – according to a Bloomberg survey, although this is still responding to the ECB target. Officials expect the economy gain dynamic in the coming years, but adverse conditions range from US trade policies to wars in Ukraine and the Middle East.
Nugel said he hoped that tariff negotiations are “reaching a good end”, but that in the meantime the most stable commodity markets are an improvement over the recent past. “We are in much better shape than a few weeks ago,” he said.
He described the euro, which has won almost 14% against the dollar this year, “only one factor” in the ECB’s thought on inflation, describing its current level “not extremely high”.