President of the Deutsche Bundesbank Joachim Nagel warned on Monday that the signs of geoeconomic fragmentation are becoming "increasingly obvious" and that the world may be on the brink of "significant escalation." He cited rising protectionist measures, most markedly in the United States and China, and noted the possibility of further tariffs under the Trump administration.
However, Nagel said global integration would have to "decrease substantially to cause a noticeable rise in inflationary pressures." He stressed that central banks have "all of the tools needed" to address inflation resulting from geoeconomic fragmentation. He also pointed out that the European Union can increase its resilience by diversifying sources of energy supply and moving away from fossil fuels, completing the capital markets union and introducing the digital euro.
