Gate News message, April 16 — Joachim Nagel, member of the European Central Bank’s Governing Council and head of Germany’s Bundesbank, stated Thursday that policymakers should not provide forward guidance on future interest rates and must preserve policy flexibility. Speaking at the International Monetary Fund’s spring meeting, Nagel noted that authorities lack sufficient information to determine whether surging energy prices will sustain inflation at elevated levels over the long term, a development that may require policy response.
The Middle East conflict between the U.S. and Iran has weakened Germany’s economic momentum, Nagel warned. Germany’s economic growth forecast for 2026 has been lowered by approximately 0.3 percentage points from the Bundesbank’s prior estimate of 0.6%, reducing the revised outlook to 0.3%. German Finance Minister Lars Klingbeil also cautioned that the Middle East situation would have a “major impact” on Germany’s economy, potentially disrupting the recovery that had just begun after years of stagnation.
The ECB will hold its rate-setting meeting in two weeks. Market participants widely expect the deposit rate to remain unchanged, though policymakers have not ruled out a rate increase. Nagel cautioned that while markets currently hold a relatively optimistic view of the Middle East situation, expecting conflict to ease and energy prices to decline, such expectations may not materialize. He emphasized the ECB’s responsibility to ensure financial stability should circumstances change.
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