Eurozone inflation is approaching the European Central Bank’s target economy

European Central Bank Board Member Joachim Nagel said that the inflation rate in the euro zone is practically close to the target rate of 2%, expecting it to fluctuate around this level despite the rise in prices resulting from customs duties in the United States.

The inflation rate in the 20 countries that use the euro accelerated to 2.2% last month from 2.1% the previous October, a slight rise that is likely not to worry the European Central Bank, which is scheduled to keep interest rates unchanged this month.

Inflation fluctuation expectations

On Tuesday, the German magazine Stern quoted Nagel, who is also the governor of the German Central Bank, as saying, “We have practically achieved (our goal), and the inflation rate will continue to fluctuate around this value in the near future.”

Nagel downplayed the impact on the European Central Bank of rising inflation in the United States, a rise he said was caused by tariffs on imports.

He warned that the matter could get worse if the Federal Reserve (the US central bank) lowers interest rates.

In response to a question about Germany’s economic prospects, Nagel said fiscal spending on the military and infrastructure could push growth beyond 1% in 2027, but the country needed to address its structural problems such as a shrinking working-age population.

It is noteworthy that the European Central Bank kept interest rates unchanged at 2% for the third meeting in a row at the end of last October and did not provide any indications of future movements, while enjoying a rare period characterized by low inflation and stable growth even in the face of trade turmoil.

The central bank of the 20 countries that share the euro currency reduced interest rates by two percentage points this year until last June, but it has not moved the interest rate since then.