ECB's Nagel says update of the December 2025 projection confirms inflation outlook, says ECB takes action when medium-term inflation projection deviates sustainably and noticeably from 2%

• Risks to inflation are currently roughly balanced.
• Inflation shortfall is short-term and small.
• Current interest rate level is appropriate.
• Prepared to adjust in either direction if needed., but is unlikely to react to short-lived slowdown in inflation.
• Even if the inflation rate falls slightly below our target in the coming quarters, there is therefore no immediate need for action.
• The potential for inflation to fall below target in the coming quarters is primarily attributable to volatile energy prices.
• The core inflation rate is expected to remain close to target over the next three years, indicating that price stability will be maintained in the medium term.
• Service prices will continue to add upward pressure to inflation, alongside wage growth, which is seen at 3% in the coming years.

Nagel's comments indicate that while inflation projections remain stable, the ECB is cautious about responding to short-term fluctuations. The emphasis on balanced risks and readiness to adjust rates if necessary suggests a commitment to maintaining price stability without overreacting to transient downturns, primarily influenced by energy prices. This stance is likely to support the current interest rate environment but leaves room for future adjustments if required.