ECB’s Schnabel: ‘Still Some Way to Go’ Before Inflation Hits 2%

23 December 2023

By Isabel Teles – FRANKFURT (Econostream) – European Central Bank Executive Board member Isabel Schnabel on Friday said that the process of bringing inflation to target was still continuing and that it was necessary to see how it would develop.

In an interview with German daily Süddeutsche Zeitung, Schnabel, asked about the recent fall in inflation and the so-called last mile of the path to price stability, said that the ECB would ‘only be satisfied if inflation falls sustainably to 2%.’

‘We expect that inflation will then [after a temporary pick up] gradually drop to 2% by 2025. So, we still have some way to go and we will see how difficult the famous last mile will be’, she said.

The inflation target would not be changed, she said.

‘Let me first assure you that we do not have any intention of adjusting our inflation target of 2%’, she said. ‘At the same time, we may be confronted with more supply-side shocks. And these could turn out to be inflationary, even though that is hard to predict.’

Since she joined the ECB in 2020, external shocks have made ‘monetary policy more challenging’ and rapid global changes have demand a swiftly reaction, she said.

‘Geopolitical shocks lead to uncertainty and thereby affect economic decisions. All of this affects our core business: the fight against inflation’, she said.

The reduction of the ECB's balance sheet was notable and would continue, but ‘the primary monetary policy instrument is ECB policy rates', she said.

‘The reduction of our balance sheet is happening gradually in the background, also to avoid market turbulence. While we are not expecting any, we are not taking any risks’, she said.