ECB's Nagel: If the Iran war persists, it will push up inflation and drag down growth

⑴ European Central Bank Governing Council member and Bundesbank President Nagel stated on Thursday that if the Iran war continues for a long time, it will push up inflation in the eurozone and damage economic growth. However, he also pointed out that it is still too early to draw conclusions about the impact of the conflict. ⑵ In his speech, Nagel distinguished between different scenarios: if the conflict ends quickly, the consequences for inflation will be short-term and generally limited. He emphasized that for monetary policy, the key is to determine whether these are temporary supply shocks that should be "looked through." ⑶ However, if energy prices remain high for a prolonged period, it will lead to rising inflation and weaker economic activity in the eurozone. Nagel believes that in the current turbulent situation, it is still too early to draw any monetary policy conclusions regarding interest rate settings. ⑷ When releasing the Bundesbank's 2025 annual report, Nagel disclosed that due to the impact of bonds purchased during the stimulus programs over the past decade, the Bundesbank lost 8.6 billions euros last year. Although the loss is shrinking, he expects a deficit to be recorded in 2026 as well. In addition, the annual accounts show that the Bundesbank's 3,350 tons of gold reserves remain stored in the same locations: Frankfurt, New York, and London.