ECB’s Nagel Flags Risks of Weaker Growth and Higher Inflation

26 January 2026

By Marta Vilar – MADRID (Econostream) – European Central Bank Governing Council member Joachim Nagel said on Monday that the economic outlook and projections remain subject to significant uncertainty, with risks that growth could turn out weaker and inflation higher

In a speech slated for delivery at the Ambassadors Club e.V. Lunch Jour Fixe in Berlin but not held because of adverse weather, Nagel, who heads the Deutsche Bundesbank, said that inflation in Germany and the euro area was “back towards 2%”, describing this as “very good news for all.”

Higher fiscal spending would “clearly” bolster economic growth in Germany, he said, with an estimated contribution of 1.3% to GDP by 2028. However, he said that additional spending would not be the sole driver of the recovery.

“A revival in household demand will also play an important role over the entire forecast horizon,” he said. “By contrast, we expect business investment to remain dampened by a difficult investment environment owing to cyclical and structural headwinds. It will return to an expansionary path only slowly and later in 2026.”

Exports were expected to resume modest growth over the course of the year and make a positive contribution to overall activity, he said, noting that higher tariffs were still weighing on export performance. Even without further tariff escalation, momentum was likely to recover only gradually, he said.

“To sum up: the German economy will be gradually returning to a recovery path over the course of 2026,” he said.

He added that uncertainty surrounding the outlook was unsurprising, reiterating that “[e]conomic growth could be weaker, inflation could be higher.”

The economy was facing multiple global challenges, including artificial intelligence, digital innovation and climate change, alongside trade tensions and geopolitical conflicts, he said.