ECB’s Schnabel: Need Price Pressures to Ease as Forecast to Gradually Start Cutting Rates

14 May 2024

By Isabel Teles – FRANKFURT (Econostream) – European Central Bank Executive Board member Isabel Schnabel on Tuesday said that in order to start gradually reducing interest rates it was necessary to observe price pressures moderating in line with the ECB's projections.

Speaking at the German Chancellery in Berlin, Schnabel, according to a text provided, said, ‘In the coming weeks and months, we will therefore need to monitor closely whether underlying price pressures ease as forecast, so that monetary policy can be gradually eased.’

Data showed that the ECB had made progress in restoring price stability, which ‘strengthens our confidence that we will be able to bring inflation back to our 2% target in a timely and sustainable manner’, she said.

However, she noted that inflation in services, which were particularly wage-dependent, remained high.

Low productivity growth in the euro area was a source of concern because it increased the risk of firms passing higher labour costs on to consumers, which ‘could delay a return of inflation to our 2% target’, she said.

Productivity growth was dependent on two factors, she said, namely ‘the use and development of technologies at the company level, and the allocation of resources between companies.’

‘From a monetary policy perspective, if Europe plays a leading role in terms of productivity, this will also help the ECB to maintain price stability’, she said.