The comments come just days after Germany’s biggest tabloid Bild criticised the bank and its president, Christine Lagarde, over perceived insensitivity to the plight of ordinary people. Acknowledging inflation fears, Schnabel said tightening policy prematurely risked choking off growth.
“This high inflation is causing growing concerns among people and we are taking these concerns very seriously,” Schnabel told a financial conference.
“There remain good reasons to believe that inflation in the euro area will visibly decline over the course of next year and gradually fall back below our target of 2% in the medium term, meaning that the conditions … for raising rates are very unlikely to be satisfied next year,” she added, echoing earlier comments from other policymakers.
Euro zone inflation exceeded 4% last month, twice the ECB’s target, and is set to go higher, irking some in Germany, the euro zone’s biggest economy and a long-time critic of the ECB’s ultra easy monetary policy.
Schnabel said that this is a tricky situation for the bank as it continues to provide ample stimulus even as inflation is high and the side effects of policy are rising.
“This indeed also poses a threat to our independence because we do see that many politician now speak up and say: are they still following their mandate or not?” Schnabel added, without specifying any politician by name.
The bank has long argued that most factors pushing up prices are temporary and related to the economy’s post-pandemic reopening, so once they pass, price growth will fall sharply.
“A premature tightening of monetary policy would hurt economic growth and negatively affect employment, including for those people that are still out of work,” Schnabel said.
Source: Economy - investing.com
