In particular, the sharp increase in energy prices caused by the situation in the Middle East posed a challenge, Mr Nagel said in Washington, DC, stressing that this had a double impact: Both in terms of economic growth and as a driver of inflation, the situation shows that we need to be much more independent. This is because it also has feedback effects on monetary policy. Overall, he said, the situation was characterised by uncertainty. It was unclear how long the impact of the war would be felt, even if the conflict were to be brought to an end in a timely manner. 

Nagel underlined: In Europe, we need to ask ourselves where the journey is going. How can we solve issues together in future? According to the Bundesbank President, the current challenges could also be an opportunity to advance in certain areas so that we in Europe will be able to change our position in the future. 

German economy affected – war progression has braking effect

The German economy had been affected by the crisis situation, Nagel said, explaining that the progression of the war had put the brakes on growth: We started the year quite respectably. Then came the war. Now we have to assume that it will have a dampening effect on growth. He expressed his wish that peace would come soon. With regard to monetary policy, he said: The Bundesbank’s mandate needs to be at the heart of the matter.

Work on competitiveness and independence

At the event, Nagel also spoke with Bloomberg and CNBC about the current situation. The crisis has shown that we need to work on our competitiveness and our independence, he emphasised in an interview with CNBC about the impact on Europe of the Iran war.

Speaking with Bloomberg, he said, The Strait of Hormuz is an Achilles’ heel. We should be cautious, take all information into account, and see what happens. Looking ahead to the next ECB interest rate decision, he emphasised that more data were needed: Two weeks can bring a lot of new information, and we’ll take it into account.

This year’s Spring Meetings of the World Bank and the International Monetary Fund are being held from 13 to 18 April. Representatives from 191 member countries and thousands of policymakers, journalists, and civil society leaders will be participating.