ECB’s Schnabel: ‘What Happens in the US Can Have an Impact on Our Decisions’

2 April 2025

By Marta Vilar – PARIS (Econostream) – European Central Bank Executive Board member Isabel Schnabel said on Wednesday that developments in the US could have an impact on the ECB’s decisions.

During the Q&A session following a speech at the Sciences Po University in Paris, Schnabel said she believed in the Fed’s independence after being asked if potential interest rate cuts by the Federal Reserve as a response to tariffs could impact on the ECB’s decision.

‘They have to look at what the policies, tariffs, tax cuts are going to imply for inflation and employment and then they will act accordingly’, she said.

The ECB was ‘one of the most independent central banks in the world’ and based its decisions on its own analysis, conclusions and collection of data, she said.

‘Of course, the US is so important that what happens in the US can have an impact on our decisions’, she said. ‘What has become very clear is that there’s no sense in which the ECB follows the Fed … we have seen many times that that is not how it works.’

Neutral rate estimates were ‘very imprecise’, she said.

‘The model uncertainty is huge’, she said. ‘[With] the parameter uncertainty you get bands that are so wide that you really don’t have a clue where the famous r* is.’

The ‘positive growth narrative’ suggested by the recent rise in European bond yields argued for higher real rates and higher r*, she said.