Oil price becoming increasingly important for ECB, Bundesbank chief says

"It's definitely not the only indicator but it's become a more relevant indicator over the last four years, this is for sure," Nagel told an event hosted by London's Society of Professional Economists.

"It is obvious that we in governing council have to look at it and we have to take it into account when we take our decisions," he said about oil prices.

Still, he kept open the door to more rate hikes. He said rates, now at 2.5%, are in a territory that neither restrict economic growth nor stimulate it.

"I cannot exclude that if we are confronted with higher energy prices like this, that we have to go into the mild restrictive territory of monetary policy," he said.

But he played down some worries about second-round inflation effects, arguing that the labour market was far softer than in 2022, when an energy-price-led inflation fuelled increasing wage demands, leading to a wage-price spiral.

He also said there were no significant second-round effects in the data.

For now, the ECB needed to maintain its approach of making decisions meeting by meeting, Nagel said.

This means that policy needs to be somewhere between "constructive ambiguity," or intentional policy vagueness, and setting "forward guidance" or making explicit commitments about future policy moves, Nagel said.

LONDON, Sept 22 (Reuters) - Oil prices are an increasingly important indicator for ECB policymakers in setting interest rates but other factors also play a crucial role, Bundesbank President Joachim Nagel said on Tuesday after markets raised rate-hike bets on expensive energy.