ECB’s Schnabel: New Price Shocks Not Ruled Out; ECB to Remain Data-Dependent

23 June 2024

By Isabel Teles – FRANKFURT (Econostream) – European Central Bank Executive Board member Isabel Schnabel on Sunday said that the ECB was wary about potential price shocks and would continue to be data-dependent when deciding about interest rates.

Speaking at the Kiel Institut für Weltwirtschaft in Germany, Schnabel said that the euro area ‘could be threatened by new price shocks’, mainly from geopolitical tensions and climate change. ‘That’s why we are on alert and haven’t pre-committed to a fixed rate path but are staying data-dependent’, she said.

She reinforced her view that the last mile of disinflation was difficult, with the process likely to be ‘somewhat bumpy.’

‘Recent developments point in the right direction’, she said. Goods inflation was slowing down quickly but services inflation was proving to be sticky, she said.

There was evidence showing that firms were starting to absorb higher wage costs in their profit margins, she said, and no signs of a wage-price spiral.

‘Now that inflation is going back, we’re seeing that wage growth is also gradually easing, and there are no indications of a wage-price spiral like we saw in the 1970s’, she said. ‘That’s because we’ve manage to anchor inflation expectations of companies and households at our inflation goal.’