In our projections, inflation will continue to rise until the end of 2026. So it will get worse before it gets better, but [cough] it will get better.
Madam Lagarde.
Ms. Lagarde, thank you for the interview. I would like to talk to you about the biggest concern of the Germans: inflation. We were just at a nearby gas station. At midday, the price for one liter of diesel jumped to an incredible 2.50 euros. Incredible. Will it soon be cheaper to fill up?
You are talking about the commodity energy, and especially diesel. That is the fastest-rising price we are seeing at the moment. Diesel is produced by refining oil, and the price is rising sharply at the moment.
Especially because Brent — that is the unrefined oil — is becoming more expensive, because the Strait of Hormuz is closed and there is less supply on the market. It is also going up because there is less refinery capacity to convert this oil into diesel. So you have a more expensive raw material and less refinery capacity, and then the price goes up.
Will that come to an end?
I do not have the answer to that question. The answer I can offer you is that we will do everything possible to ensure that inflation is at the 2% target in the medium term, and we will do everything necessary to achieve that.
But as the European Central Bank, you have neither influence on the global oil market nor on the Strait of Hormuz. Isn't the ECB fundamentally powerless against this supply shock?
No, no, we cannot reopen the Strait of Hormuz. You are right about that. The ECB, no matter how powerful it is, cannot do that. What we can do, however, is try to reduce the consequences arising from the closure of the Strait of Hormuz. And that is exactly what we are doing — achieving price stability in the medium term, and we will do that.
Many Germans remember the inflation of 2022, back then over 8% in Germany. Can you guarantee that this will not happen again?
What I can tell you is that we learn from history. We know what happened in 2022. We know how fast it went. And we are very attentive to the individual developments, to the individual factors that can tell us: "Watch out, it is going up and it is going fast," so that we can immediately take the right measures to get ahead of the development and prevent it.
And if there is a shortage, I cannot make up for it. I cannot drill, I cannot refine — I am only the central bank. My tools are interest rates. That is all I can do.
When will inflation come back to its 2% target?
So, we try to forecast ahead of time, so that we can then say when we will reach 2% — in 2027, in 2028 — and how fast. In our projections, inflation will continue to rise until the end of 2026. So it will get worse before it gets better.
But it will get better. During the course of 2027 it will decline. If it is very high in 2026, it will decline in 2027, and we will reach the target at the end of 2028.
So, we'll hold you to that. Rising cost of living is the biggest concern of the Germans. Would you agree that this drives voters directly into the arms of extremists and populists?
You know, our task as a central bank is to deliver price stability. There are various things that play a role. Financial stability is one of them, because you cannot have one without the other.
So we are attentive to that as well. What I have found in my life, during my 8 years as head of the International Monetary Fund and now 7 years as head of the ECB, is that we need political stability and not geopolitical instability, as we see in other regions of the world, in order to deliver that price stability — so political stability, financial stability, and price stability.
And we are responsible for price stability. There are other factors that I wish I could control, but I cannot.
This weekend we saw a record result for the AfD in Saxony-Anhalt. We see that Marine Le Pen is leading the polls in her home country of France. Does that worry you?
I am not a political person when you ask me this question as head of the ECB. That is why I answer in this role. I have already said that political stability is important, and uncertainty is difficult to handle. And we are in such a situation,
because there is uncertainty all around us, here in Europe and also outside of Europe. And I would like to say that for the people who have to pay for diesel, for petrol, or for food, the biggest factor is the Middle East and the influence that has on energy. And that is what we are particularly worried about.
The president of the German Bundesbank, Mr. Nagel, just stated at the press conference that he is concerned. Isn't he right?
