ECB Executive Board member Schnabel recently pointed out that the ECB must maintain flexibility in terms of interest rates. Schnabel stated that the ECB has not promised a fixed interest rate path, but instead relies on data. She also acknowledged that the process of combating inflation may be "somewhat bumpy".
Given the new fluctuation risks of inflation in the Eurozone, Isabel Schnabel, a member of the Governing Council of the European Central Bank, recently pointed out that the European Central Bank must maintain flexibility in interest rates.
Isabel Schnabel stated on Sunday, June 23rd, "We may face new price shocks. That's why we remain cautious, do not commit to a fixed interest rate path in advance, but rely on data."
The European Central Bank lowered interest rates earlier this month, officials said it would not be the only interest rate cut this year, but they did not provide much guidance on the pace of the rate cut. Most European Central Bank officials have stressed that there are still lingering inflation risks and advocate for cautious action.
Schnabel pointed out that the process of anti-inflation may be "bumpy" and added, "We describe it as the difficult last mile."
Earlier this month, Schnabel warned that the recovery of the eurozone economy was gradual, but the last mile of inflation decline was bumpy and the inflation in the service sector was stubborn.
Inflation stickiness.
Schnabel said that while inflation in goods is rapidly slowing down, price pressure from the service sector is more sticky. In May, the eurozone's inflation rate rebounded from 2.4% to 2.6% and economists currently expect the inflation rate to fall to 2.2% in June.
According to forecasts released earlier this month, the European Central Bank believes that the consumer price index will not reach the 2% target until the last quarter of 2025.
Schnabel believes that recent developments indicate the right direction, but she also warned that geopolitical risks and the impact of climate change could both be potential supply-side shocks. At the same time, labor hoarding has been dragging down labor productivity and weakening the transmission of monetary policy.
Nevertheless, Schnabel reassured, "Inflation is now falling, and we see wage growth gradually slowing down. There is no sign of a wage-price spiral. We have successfully fixed the inflation expectations of businesses and households on our inflation target." She also said that businesses have begun to absorb higher wage costs.
Overall, Schnabel's speech conveyed a message that the European Central Bank will remain vigilant in the face of constantly changing economic environments and potential new shocks, and flexibly adjust its monetary policy based on real-time data.