(Reuters) – The European Central Bank (ECB) must be patient on cutting interest rates as inflation could pick up and recent data confirms fears that the “home stretch” to reduce inflation Price growth will be the most difficult, Isabel Schnabel, a member of the ECB governing council, told the Financial Times.
The ECB has kept interest rates at record levels since September, but the debate over easing monetary policy is intensifying. Markets believe the central bank will make a first rate cut in the spring, given weakening economic growth and price pressures.
Isabel Schnabel nevertheless warns against cutting too early, highlighting some worrying signs as a new “critical” phase of disinflation begins.
“Expectations for selling prices in services have increased for several months in a row,” she said, according to comments reported Wednesday by the FT.
A resurgence in inflation is not the ECB’s base case scenario, but this data warns against easing policy too quickly, especially as shipping disruptions in the Red Sea have sparked concerns regarding new difficulties in the supply chain.
“I would say that we are now entering a critical phase where the calibration and transmission of monetary policy become particularly important because it is about containing second-round effects,” says Isabel Schnabel.
“We have made substantial progress, and that is good news,” she added. “But we are not yet at the end of our troubles.”
(Writing by Mrinmay Dey in Bangalore and Balazs Koranyi in Frankfurt; Blandine Hénault for the , edited by Kate Entringer)
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