ECB’s Nagel Sees Inflation Fluctuating Around 2% in Near Term

2 December 2025

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Joachim Nagel said in an interview published Tuesday that euro area inflation had practically reached 2% and would fluctuate around that level in the near term.

Prompted by a question about the role of the US and China, Nagel, who heads the German Bundesbank, told German news magazines Capital and Stern, “Developments in other currency areas are just one factor among many. Our goal is an inflation rate of 2% in the medium term. We have practically achieved this, and the inflation rate will continue to fluctuate around this value in the near future.”

There was some inflationary pressure in the US because high tariffs on imports were gradually taking effect, he said. Interest rate cuts could raise prices there even further, he said.

German growth in 2025 would be very small after two years of recession, he said, but fiscal measures should provide initial impulses in 2026, with growth of more than 1% possible in 2027.

He cautioned that geopolitical conditions remained difficult and said the recovery would not be automatic. Germany could emerge from its weak phase by strengthening growth drivers and raising productivity, he said.

Nagel reaffirmed his long-held view that longer working lives were necessary to offset retiring workers. He said the Bundesbank supported linking the retirement age to life expectancy after 2031, which could raise the retirement age toward roughly 69 by 2070. Expanded private, funded pension provision would also be sensible, he said.

A functioning public administration was essential for an upswing, he said. He called for investment in future-oriented fields such as artificial intelligence, clearer energy policy, lower corporate tax burdens and faster implementation. “We have no time left for inactivity,” he said.

Nagel welcomed the government’s intention to direct more money to infrastructure, digitalization and defense, saying these were the right areas. The authorities were also trying to mobilize more private capital, he said, adding that the Bundesbank was watching carefully how new borrowing room was being used.

The Bundesbank had set out a structured plan to halt the upward trend in public debt and re-anchor the debt ratio at 60%, he said.

Germany and Europe often understated their own strengths, he said. Other countries projected greater confidence, he said, while Germany still had “a lot to offer,” including strong vocational training. Europe should not be perceived as unable to deliver reforms, he said.

He said excessive bureaucracy remained a significant obstacle. Financial market regulation alone comprised more than 1,600 documents totaling over 95,000 pages, he criticized, calling for substantial simplification of reporting and data requirements. He noted that many investors wanted to diversify beyond dollar exposure and said Europe still had much potential.

On China, he said Europe needed fair trade conditions and could use its market size to press its case. Europe’s 450 million people represented an important consumer base for China, he said.