Euro-area inflation expected to meet ECB target over next years: Bundesbank President Joachim Nagel.

Bundesbank President Joachim Nagel believes that euro-area inflation will meet the European Central Bank's 2% target over the next years. ECB projections show annual consumer-price growth at 1.7% in 2026 and 1.9% in 2027. Nagel also suggests thinking "out of the box" to finance Europe's defenses, possibly through a joint budget and common debt.

Bundesbank President Joachim Nagel expressed confidence in the European Central Bank's (ECB) current monetary policy settings, stating that he is "rather comfortable" with the current interest rates and sees no immediate need for change. Speaking at the International Monetary Fund's annual meetings in Washington, Nagel emphasized that the ECB is close to its 2% inflation target and that the economy has shown resilience despite various headwinds, according to a Bloomberg report.

Nagel's comments come as the ECB projects annual consumer-price growth to reach 1.7% in 2026 and 1.9% in 2027, suggesting that inflation is on track to meet the target over the next few years. The Bundesbank president underscored that he is open to altering the ECB's stance if new data indicates a shift in the outlook, but for now, he believes the current policy is appropriate, Bloomberg reported.

While most policymakers are comfortable with the current level of interest rates, some, such as France's Francois Villeroy de Galhau, have suggested that further rate cuts should not be excluded. Nagel acknowledged the potential risk of China redirecting low-cost products to Europe due to U.S. tariffs, but he stressed the need for dialogue with China to prevent an influx of cheap goods, Bloomberg noted.

Nagel also touched on the possibility of financing Europe's defenses through a joint budget and common debt, suggesting a need to think "out of the box" to address the region's security challenges.