Bundesbank President Joachim Nagel, a member of ECB Governing Council, cautioned about enduring inflationary challenges during a speech overnight. Nagel noted the confluence of factors, including supply chain resilience, impending labor shortages due to demographic shifts, and the green transition, all of which could exert upward pressure on prices.
“To improve resilience, some form of de-risking seems reasonable, especially in the case of strategically important goods,” Nagel said in a speech. “We should keep in mind that greater security for supply chains is likely to come with some additional price pressures.” These structural changes in the eurozone economy, Nagel argued, could sustain inflationary tendencies for an extended period.
Highlighting demographic trends, Nagel projected a significant annual decline of 80,000 individuals in the potential labor force starting from 2026. This demographic shift, he emphasized, could drive wage growth, thereby fueling inflationary pressures further.
Nagel reiterated the ECB’s commitment to price stability, emphasizing its mandate to curb inflationary pressures. “One thing is clear: Our mandate is price stability!” he said. “If there is more price pressure in the medium-term, we must take action against it… price stability is a prerequisite for an efficient adjustment process.”
