ECB signals caution on interest rates

Bundesbank President Joachim Nagel said elevated energy prices have not yet produced clear second-round effects in wage and price setting. 

Nagel said longer-term inflation expectations remain consistent with the ECB's 2% target. However, he warned that low gas inventories, elevated energy costs and risks to food prices could maintain upward pressure on inflation.

Markets currently expect the ECB to raise its 2.5% deposit rate another two or three times over the coming year. Nagel did not endorse a specific rate path and said future decisions should remain dependent on incoming economic data.