By David Barwick – FRANKFURT (EconoStream) – The European Central Bank is basing its policy stance on medium-term inflation prospects rather than the exchange rate, Executive Board member Isabel Schnabel said Wednesday.

In an interview with Agence France Presse, Schnabel, according to a text provided by the ECB, said that the ECB’s strategy review may well yield an outcome different from that of the U.S. Federal Reserve.

Asked whether the ECB’s recent verbal interventions regarding the euro’s appreciation would be enough to stem the common currency’s rise, Schnabel recited the ECB’s mantra that the exchange rate is not a target.

‘We adjust our policies according to the medium-term inflation outlook’, she said. At last week’s Governing Council meeting, following which ECB President Christine Lagarde mentioned the exchange rate in her introductory statement, ‘there was still an exceptionally high level of uncertainty’ and Council members felt that ‘more information was needed on how the pandemic evolves, how our measures transmit to the real economy and how persistent exchange rate movements would ultimately prove to be.’

Exchange rate developments are among the incoming data monetary authorities are paying close attention to, she said, ‘and we stand ready to act if the incoming data is not consistent with the objective of our emergency measures to close the inflation gap that has emerged as a result of the pandemic.’

Like the economy in general, inflation would take time to return to the path of before the crisis, Schnabel said. The ECB is focused on the medium term and sees its measures as visibly propping up core price pressures, even if other factors are offsetting that to a degree, she said.

Asked whether the ECB might, like the Fed, decide to target average inflation as a result of its strategic review, Schnabel noted that the euro area and the U.S. differ, in particular with respect to the mandate of monetary policy.

‘We will review our strategy with an open mind but it could well be that we do not end up with the same strategy as the Fed’, she said.

In other comments, Schnabel said she ‘would encourage the negotiating parties to work hard’ to reach agreement, as ‘[a] no-deal Brexit would be harmful for everybody’. However, everyone should be prepared for the possibility of no deal, she added.