ECB’s Nagel Warns Oil Price Volatility Won’t Ease Inflation Quickly

Nagel’s assessment arrives as a preliminary agreement between U.S. and Iranian officials to reopen the vital energy gateway triggered a sharp drop in oil prices. Despite the market optimism, the central bank remains on high alert. Nagel reaffirmed that all policy options remain on the table for the July 22–23 meeting, including further interest rate hikes to prevent energy costs from embedding themselves deeper into the broader economy.

The ECB initiated its first rate hike in three years last week, attempting to preempt the fallout from severe supply disruptions. The inflationary pressure is poised to intensify once temporary government interventions, such as Germany’s fuel price discounts, expire. According to Nagel, these measures artificially suppressed the euro zone inflation rate by 0.4 percentage points in May. Without these cushions, the central bank expects a renewed climb in consumer prices as the market adjusts to the lingering scarcity.