Bundesbank President Warns of Persistent Euro Zone Inflation Risks
Joachim Nagel warns that low gas storage and destroyed refining capacity will keep Euro zone price pressures strong despite a lack of wage-driven inflation.
Bundesbank President Joachim Nagel stated on Monday that Euro zone inflation remains high at 3.8%, nearly double the European Central Bank's 2% target. Speaking at a precious metals conference in Sorrento, Italy, Nagel noted that there are no clear signs yet that high energy costs have triggered second-round effects on wages and other prices.
Nagel warned that price pressures will likely persist due to low gas storage levels, destroyed refining capacity, and food price risks caused by wildfires and drought. He highlighted that the destruction of refining capacity is significantly driving up prices for refined petroleum products.
While financial markets expect two to three additional interest rate hikes in the coming year, Nagel declined to endorse these predictions. He asserted that the European Central Bank must remain flexible and base its decisions on incoming data. Additionally, he noted that geopolitical stress and high debt levels maintain a strong case for gold diversification, even as rising yields make bonds more attractive.
