ECB’s Nagel: No clear ​signs that inflation has fed through to price and wage setting

European Central Bank (ECB) policymaker and Bundesbank President Joachim Nagel said in a speech in Sorrento, Italy during the European trading session on Monday that the impact of energy shock-driven inflation has yet not fed into wage growth.

Comments

Longer-term market-based and expert expectations remain ​consistent with the Eurosystem’s 2% inflation target.

Upward risks dominate the inflation outlook; uncertainty calls for flexibility, not inaction.

Gas prices are especially vulnerable because storage levels are low.

Europe may need to ​buy substantially higher volumes during the winter.

The ​destruction of refining capacity is driving up prices for refined petroleum products significantly.

Drought, wildfires ‌and ⁠fertiliser shortages also pose risks to food prices.

This was increasing the relative attractiveness ⁠of bonds ​among reserve asset managers.

The case for ​diversification into gold remains significant given continued geopolitical stress and the credit risk associated with high debt ​levels.

Market reaction

No immediate impact on the Euro (EUR) from ECB Nagel's comments. At press time, EUR/USD is down 0.3% to near 1.1215 even after recovering a majority of its early losses.

Nagel flags inflation risks, keeps Euro bulls alert

ECB’s Nagel delivers a stronger-than-usual signal, with a 7.2/10 FXS Speechtracker score versus a 6.6/10 historic average, pointing to a modest hawkish shift. The emphasis that “upward risks dominate the inflation outlook” suggests reluctance to ease policy quickly, which tends to underpin the Euro as markets reassess the path of future rate cuts.

Nagel’s call that “uncertainty calls for flexibility, not inaction” reinforces a bias toward keeping options open for further tightening if needed, rather than committing to a dovish stance. At the same time, noting “no clear signs that inflation has fed through to price and wage setting” tempers the hawkish tone, but overall the balance of risks still leans toward supporting the Euro on expectations of a more persistent anti-inflation stance.