ECB Insight: Schnabel, on Twitter, Hews Unerringly to the ECB Line

9 February 2022

By David Barwick – FRANKFURT (Econostream) – If thought-provoking exegeses of important issues were the goal, the medium of communication would likely be other than Twitter. In a Twitter interview on Wednesday, European Central Bank Executive Board member Isabel Schnabel steered clear of venturing out onto any limbs.

Still, for those interested in the details, for the sake of convenience we assign Schnabel’s most significant statements (and then some) to various buckets:

Rationale for possible action:

‘[I]f high current inflation threatens to lead to a de-anchoring of inflation expectations, we may still need to respond’.
‘An extended period of high energy price inflation may lead to expectations of higher inflation in the future.’
‘If there is a risk that inflation expectations become unanchored, we need to take action even if the shock is exogenous.’
‘If we judge that inflation will remain above our target over the medium term, the ECB will adjust its monetary policy, as appropriate.’
‘But we are seeing that inflationary pressures are broadening and becoming more persistent.’
‘Inflation will remain high for longer than anticipated.’
‘There is a risk that inflation continues to rise in the near term’.
‘The economy is recovering. The progress made towards our 2% inflation target over the medium term permits a step-by-step reduction in our asset purchases.’
‘We need to minimise the risks of both – acting too late and acting too early.’

How ECB action will look:

‘But any adjustment to our policy will be gradual.’
‘The process of normalisation will be data-dependent and gradual, avoiding unnecessary disruptions.’
‘[W]e will end net asset purchases before we raise interest rates.’

Special attention:

‘Besides supply shocks, we have to assess the strong developments in the labour market and their implications for medium-term inflation.’
‘What matters for inflation is the growth in wages over and above productivity growth. We carefully monitor wage developments as they are crucial for the inflation outlook.’
‘[Y]ields are an important input into our analysis.’

Good news:

Inflation ‘is likely to gradually decline towards the end of this year.’
‘Today longer-term inflation expectations are well-anchored.’
‘The euro area architecture is more resilient than it was at the time of the sovereign debt crisis’.
‘Currently, longer-term inflation expectations remain well-anchored.’
‘For a long time euro area inflation was below our target but it is now moving towards 2% in the medium term.’

Sympathy:

‘We take people’s concerns about rising prices very seriously.’
‘We know that high inflation causes significant hardship for people who bear the rising costs of food, housing and transportation.’
‘Current inflation is painfully high’.

The Promise:

‘We will make sure that inflation stabilises at our 2% target over the medium term.’
‘We will ensure that [currently high inflation] will not persist over the medium term.’
‘We will ensure that high inflation does not become entrenched.’
‘You and all EU citizens can trust us that we will use all our instruments to stabilise inflation at our 2% target in the medium term.’
‘We are ready to adjust all our tools to make sure that inflation stabilises at our 2% objective over the medium term.’

Uncertainty:

‘There remains high uncertainty around the inflation outlook.’
‘But due to the pandemic and structural changes, the uncertainty around the inflation outlook is unusually high.’
‘Due to the pandemic and structural changes in the economy, uncertainty around the inflation outlook is unusually high.’