ECB’s Nagel: 2028 Projection Will Determine if Still on Track to Meet 2% Inflation Target

1 December 2025

By Marta Vilar – MADRID (Econostream) – European Central Bank Governing Council member Joachim Nagel said on Monday that interest rates were at “broadly” neutral levels and that the ECB’s first inflation projection for 2028—set for release in the Governing Council’s December meeting—would indicate whether the institution remains on course to reach its 2% target.

Speaking in a lecture at Yonsei University in Seoul, Nagel, who heads the Deutsche Bundesbank, said that Germany’s economy would face two contrasting forces in the coming years: downside risks from trade uncertainty and upside support from increased public spending.

However, he cautioned that fiscal expansion alone would not change the country’s long-term growth trajectory.

“Our internal Bundesbank simulations show that the extra fiscal spending would only modestly raise potential output,” he said. “To exploit the full potential of the fiscal package, it must be complemented by structural reforms.”

Nagel urged Germany to swiftly cut unnecessary bureaucracy, advance the energy transition at minimal cost, adopt labour-market-focused migration policies, and make better use of older workers.

On euro area monetary policy, he said the current stance appeared “broadly neutral,” though he warned that this assessment should be treated carefully due to the uncertainty surrounding estimates of the neutral rate.

Nagel said that the ECB’s staff projections had been “quite stable for some time now” and suggested that rates were “currently in a good place.”

The December forecasts, including the initial outlook for 2028, would help the ECB assess “whether we are still on track to meet our medium-term inflation target,” he said.