ECB’s Schnabel: We Assume Inflation Will Reach Its High Point in November

29 November 2021

By David Barwick – FRANKFURT (Econostream) – Euro area inflation will peak this month and then slowly go back down in 2022, European Central Bank Executive Board member Isabel Schnabel said Monday.

In an interview on German television news programme ZDF Morgenmagazin, Schnabel acknowledged that ‘many people are currently concerned’ about high rates of inflation, but urged that it be viewed in the context of the pandemic and the subsequent ‘astonishingly quick’ recovery.

Compared with pre-pandemic price levels rather than the pandemic-induced low prices of one year ago, inflation is only around 2%, she said.

‘We are operating on the assumption that the high point of inflation developments will be reached in November and that inflation will gradually subside in the coming year’, she said. ‘Inasmuch, there are no indications that inflation is getting out of control.’

Supply constraints will ‘gradually resolve’, she said, and ‘inflation will not continue with the same pace.’

If the ECB were to observe inflation persisting at levels above its price stability target, ‘we will react very determinedly’, she said. Asked how, she said that the ECB had instruments to tighten policy, but that to do so now would be ‘a mistake’ that would not change anything about current inflation but would increase unemployment.

She conceded that firms assume supply constraints will last relatively long, some for well into next year, and emphasised the elevated state of uncertainty.