Joachim Nagel, President of the Deutsche Bundesbank, addresses the audience at the institution’s press conference on the 2025 Annual Report. (zu dpa: «Bundesbank chief hints at ECB interest rate hike due to high inflation») Hannes P Albert/dpa
The head of Germany’s Bundesbank has hinted that the European Central Bank could raise interest rates at its next meeting in June, warning of rising inflation linked to the war in Iran.
Joachim Nagel, the president of the German central bank, told the Handelsblatt financial newspaper on Wednesday that officials “cannot ignore the high energy prices.”
“Interest rate rises are becoming increasingly likely unless the inflation picture changes fundamentally,” he added.
“We may still have a lot to contend with when it comes to inflation,” warned Nagel, who is also a member of the ECB’s governing council.
He did not rule out inflation rates exceeding 4% in some months. The central banker said: “Even if the war ends soon, the inflation rate could remain elevated for much longer than we thought just a few weeks ago.”
Inflation in the eurozone rose to 3% in April, well above the ECB’s target of 2% in the medium term. However, the core inflation rate – which excludes volatile energy and food prices – is significantly lower.
As there are still no signs of progress towards an end to the Iran conflict and the transport of goods through the Strait of Hormuz remains hampered, expectations are growing in the financial markets that the ECB could raise interest rates.
However, the governor of the Bank of France, François Villeroy de Galhau, made it clear on the radio station France Info that there is not yet sufficient information on the future development of core inflation to make a decision.