By Ed Frankl


The deal between Iran and the U.S. to end the fighting offers reason for hope, though the impact of the jump in energy prices from the war will continue to be felt, Bundesbank President Joachim Nagel said Monday.

"Fortunately, a ceasefire and the reopening of the Strait of Hormuz are now in sight. There is reason to hope for peace," Nagel said in a speech in Frankfurt. "Nevertheless, even if the Strait of Hormuz becomes navigable again soon, it will take months for the oil supply to return to normal."

The European Central Bank last week raised its key interest rate by a quarter-point as inflation swelled after the outbreak of the war. Nagel, a member of the ECB's governing council, said the bank was "keeping all options open" for its meeting next month.

"Monetary policy is not dealing with a short-term supply shock that we can passively look through," Nagel said.

Second-round effects on inflation can't be ruled out given that high energy costs will persist in the coming months and potentially drive up wage demands should inflation expectations rise, he added.

Price pressures could rise again when policy measures to lower energy prices expire, he noted, saying that they damped the eurozone's inflation rate by around 0.4 percentage points in May. Headline inflation came in at 3.2%.

The Bundesbank last week lowered its forecast for German growth to 0.5% this year and 0.8% for 2027, down from 0.6% and 1.3% it anticipated in December. The economy should then pick up speed by 2028, Nagel said.

ECB President Christine Lagarde told French radio station France Culture on Monday that the agreement was "good news."

"One can only welcome it," she said, though cautioned that there had been prior occasions when hopes were dashed just as a deal seemed imminent.


Write to Ed Frankl at edward.frankl@wsj.com


(END) Dow Jones Newswires

06-15-26 1215ET