ECB’s Schnabel: Sustainable Return to Inflation Target Becoming More Likely

2 October 2024

By Marta Vilar – MADRID (Econostream) – European Central Bank Executive Board member Isabel Schnabel said on Wednesday that the ECB must not ignore the headwinds to growth and that a return of inflation to the 2% target was now more probable.

Speaking at a lecture in Freiburg, Germany, Schnabel said, ‘With signs of softening labour demand and further progress in disinflation, a sustainable fall of inflation back to our 2% target in a timely manner is becoming more likely, despite still-elevated services inflation and strong wage growth.'

Monetary policy could not resolve the structural issues holding back growth, according to Schnabel.

Lower interest rates could limit negative growth spillovers from core to peripheral economies, but monetary policy was ‘no panacea’, she said.

‘Germany, in particular, is currently facing strong headwinds that will not be resolved by lower interest rates alone’, she noted.

Monetary policy transmission via mortgages, for example, was probably weaker in Germany, she said.

Schnabel said the gradual easing of monetary policy and higher real incomes would contribute to mid-term economic activity.