FRANKFURT (Reuters) – The impact of the European Central Bank’s (ECB) interest rate hike on the real economy could take longer than usual, said Isabel Schnabel, a member of the ECB’s Governing Council. Frankfurt institution.
The ECB has raised its interest rates by a total of 375 basis points since July 2022 and further increases are expected in the coming months in order to curb inflation still above its 2% target.
“Given the current labor shortage, we can expect the transmission of monetary policy to be weaker than usual,” said Isabel Schnabel in an interview with the Belgian daily De Tijd and released Wednesday.
According to Isabel Schnabel, the generalization of fixed-rate loans is also likely to limit the impact of the tightening of monetary policy.
“Given the great uncertainty about the persistence of inflation, the price to pay for too timid action continues to be higher than for too much of a decision,” she said, pointing out that if the policy was not strong enough, inflation would take root.
Isabel Schnabel played down the impact of the recent drop in core inflation, noting that it would be premature to “declare victory” even considering that this indicator had peaked. She said she was waiting for more convincing evidence that inflation would return to 2%.
Regarding the ECB’s economic projections, it was also cautious, believing that they could not be taken for granted.
(Report Balazs Koranyi; Claude Chendjou, edited by Kate Entringer)
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