Bundesbank president Joachim Nagel welcomed news that average headline euro area inflation has fallen to 2.9%, saying it was further evidence the ECB was right to leave key interest rates unchanged following last week’s monetary policy meeting.

But various upside risks to inflation remain, he said in a speech Tuesday, adding that it was not yet possible to say whether upwards price pressures have peaked, especially with tensions in the Middle East threatening to push up energy costs.

“Our tight monetary policy is working, but we must not ease too soon,” Nagel said. Rather, key interest rates will have to remain at a sufficiently high level for a sufficiently long time [...] Inflation has proved stubborn and has not yet been defeated.”