A hoped-for peace dividend on prices, Europe's central bankers are warning, is not coming soon.

A hawkish warning

Joachim Nagel, president of Germany's Bundesbank and a member of the European Central Bank's Governing Council, warned that consumer prices across the 20-nation euro zone are likely to remain "significantly above target" even if the conflict with Iran winds down, CNBC reported. The message punctures the hope that an end to hostilities — and the relief in oil markets that would follow — would by itself be enough to cool inflation.

Where prices stand

The data explain the concern. Euro-zone inflation ran at 3.2% in May, up from 3.0% in April, more than a point above the ECB's 2% target, according to the bank's latest Economic Bulletin. Energy was the biggest driver, with prices up nearly 11% from a year earlier in the wake of the Iran-related oil-supply shock. More worrying for policymakers, services inflation — which reflects domestic wages more than imported costs — rose to 3.5%, a sign that price pressure has spread beyond energy. The ECB's own projections see inflation averaging around 3% this year and not returning to 2% until 2028.

Why peace won't be a quick fix

Nagel's core argument is that the forces keeping prices high outlast any single geopolitical event. Oil markets take time to rebalance after a shock; shipping and insurance costs do not normalize overnight; and higher energy costs have already fed into services and wages, which grew about 3.5% in the first quarter. Once wages rise, firms tend to pass the cost on — the "second-round effects" central bankers fear most. Added trade friction and tariffs, the bulletin notes, are a further headwind.

What it means for rates

The ECB raised its key deposit rate to 2.25% in June. As one of the council's more hawkish voices, Nagel's warning signals he sees no case for cutting soon: if inflation will stay elevated even with the tailwind of an Iran peace, borrowing costs may need to stay higher for longer than markets expect. The dilemma echoes the U.S. Federal Reserve's, where price pressures have also proved stickier than hoped — a reminder, felt from Frankfurt to Los Angeles, that global price shocks unwind far more slowly than they arrive.