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%
Importance
Level 1
- 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.
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