A senior European Central Bank official cautioned on Tuesday that inflation could remain stubbornly elevated above the policy target, despite a reported deal between the US and Iran aimed at ending hostilities in the Middle East.
Speaking on the sidelines of the ECB's central banking forum in Sintra, Portugal, Bundesbank President Joachim Nagel stated in an interview with CNBC's Annette Weisbach that inflation is likely to persist at high levels.
"The effects of the energy price shock are still working their way through the economy," he said. "I expect that the inflation rate will remain significantly above our policy target for some time."
This statement follows comments from US President Trump on Monday indicating that US and Iranian delegations would meet in Doha, Qatar on Tuesday, testing a fragile ceasefire after armed clashes over the weekend.
Earlier this month, citing inflationary pressures stemming from the US-Iran conflict, the European Central Bank raised its key interest rate for the first time since 2023.
Nagel affirmed on Tuesday that the rate hike decision was appropriate but noted it was too early to determine the future path of monetary policy, given the high degree of uncertainty surrounding the Middle East situation.
"For now, we need to wait and see. The situation remains very unclear," he said. "It is not yet certain whether stability in the Middle East can be achieved. While peace talks have begun, there are only about 50 days left until the agreed deadline, at which point we will be able to assess the durability of the current calm."
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