UPDATE 1 — Germany will remain the anchor of stability in Europe, Bundesbank says

(Adds quotes from Nagel and Klingbeil from paragraph 2) No financial crisis in sight despite bond market turmoil, Nagel says Companies may absorb higher energy prices instead of passing them on to consumers Nagel does not rule out further ECB action By Maria Martinez BANGKOK, Oct 16 (Reuters) — Germany will remain the anchor of stability in Europe amid turmoil in bond markets and it is "getting fit" after years of economic stagnation, Bundesbank President Joachim Nagel said on Friday in Bangkok. Nagel said the recent turmoil in bond markets reflected a combination of higher inflation, resilient growth and rising capital demand from AI companies.

"I do not see a risk that this would cause us to slide into a major financial crisis," Nagel said at a press conference at the IMF-World Bank annual meetings in the Thai capital. He added that Germany is "getting fit" for the challenges of the future, with a "fitness programme" of economic reforms, which the government should fully implement so that citizens can feel their positive impact. "Among the G7 countries, we rank second in terms of economic growth," German Finance Minister Lars Klingbeil said at the press conference with Nagel.

"The discussions here on the ground show that Germany is an attractive and interesting investment location." The government has raised its forecast for economic growth to 1.3% in 2026 and 1.1% in 2027, up from 0.5% growth for 2026 and 0.9% respectively in its April projections. However, it also raised its forecast for inflation due to the Iran conflict. Asked about the risk of higher energy prices spreading into other price categories, Nagel said the current inflation environment is different from that of four years ago, when higher prices due to Russia's invasion of Ukraine were passed on to consumers.

"I have some suspicion that the shock we are experiencing now may, to some extent, be absorbed by companies," Nagel said. The European Central Bank raised interest rates for the second time this year in September, hoping to tame an inflation rise driven entirely by higher energy ​costs from the Iran war. "If the situation remains as it is, I cannot rule out the possibility that we may have to take further action," Nagel said. (Reporting by Maria Martinez; Editing by John Mair) ((mailto:maria.martinez@thomsonreuters.com;)