European Central Bank official: Intensification of US-Iran war increases economic uncertainty, not advisable to signal rate hikes prematurely.

On Thursday, Joachim Nagel, a member of the European Central Bank's executive board and the president of the German central bank, stated that it is not appropriate to give guidance on future interest rate paths in advance, and policymakers need to retain flexibility. Nagel, speaking at the International Monetary Fund spring meeting, pointed out that the decision-makers do not yet have enough information to judge whether the surge in energy prices will keep inflation at high levels for the long term, and this may require a policy response. He said, "We need to keep our options open, it is not yet time to commit to a direction for interest rates." The European Central Bank will hold its monetary policy meeting in two weeks. Market participants generally expect that the deposit rate may remain unchanged, but policymakers have not ruled out the possibility of a rate hike given the current environment. Nagel also noted that the momentum of economic growth in Germany has significantly weakened due to the impact of the US-Iran war. This year's economic growth rate is expected to be lower by about 0.3 percentage points compared to previous forecasts. Previously, the German central bank predicted economic growth of 0.6% for 2026. German Finance Minister Lars Klingbeil also warned that the situation in the Middle East will have a "major impact" on the German economy. He said that after years of stagnation, the German economy has shown signs of recovery, but the impact of the war could disrupt this progress. "We were pleased to be returning to a growth trajectory, but the war has dealt a significant blow to this momentum," Klingbeil said, emphasizing the need for reforms and structural policies to drive the economy back onto a growth path. Nagel pointed out that the markets currently hold a relatively optimistic view on the situation in the Middle East, believing that the conflict will be resolved and energy prices will fall. However, he warned that if this expectation is not met, it could have spillover effects on financial stability. He said, "The central bank's task is to ensure that if the situation changes, it will not disrupt the financial system." Analysts believe that against the backdrop of unclear energy price trends and uncertain inflation paths, the European Central Bank may take a more cautious policy stance in the short term to avoid issuing directional signals too early.