ECB’s Schnabel: ‘In a Good Place’, With ‘Great Progress’ Made on Inflation

7 June 2025

ECB’s Schnabel: ‘In a Good Place’, With ‘Great Progress’ Made on Inflation
Isabel Schnabel, Executive Board member of the European Central Bank, at the International Holocaust Remembrance Day at the ECB in Frankfurt on January 27, 2025. Photo by Adrian Petty/ECB under CC BY-NC-ND 2.0.

By David Barwick – DUBROVNIK, Croatia (Econostream) – European Central Bank Executive Board member Isabel Schnabel said on Saturday that the ECB was ‘in a good place’ with respect to inflation.

Speaking on a panel about central bank decoupling during the 31st Dubrovnik Economic Conference, Schnabel said, ‘I think we’ve made great progress’, observing that the latest inflation figure for the euro area had been below 2%, albeit driven by energy.

‘But we do see that even the more persistent components are coming down, and that is very good news’, she said.

Wage growth was still ‘too high’, services inflation remained elevated and ‘domestic inflation generally’ was persisting on the high side, she noted.

However, past inflation shocks were fading, so that the ECB would increasingly be able to concentrate on shocks yet to come, she said.

‘We are in a good place regarding that’, she said.

That China would flood Europe with cheap goods in response to US tariff policy was not the threat some imagined, she suggested.

‘This effect is actually quantitatively quite small’, she said, citing both ECB research and recent independent analyses. In any event, if that turned out not to be the case, ‘you can be quite sure that there would be counteracting measures coming from the European Union’, she said.

The trade conflict would likely ‘play out as a global shock’, she said. ‘I would not expect a sustained decoupling, and this is also what you see in market pricing.’

The main reason why European monetary policy easing had outpaced American easing so far this year was that tariffs implied ‘larger risks to price stability over the short term’ for the US, in addition to the obvious disparity of growth on opposing sides of the Atlantic, she said.

The exchange rate had behaved ‘a bit differently’ than expected, but the impact in any case was probably ‘not as big as maybe some people believe’, she said.