ECB’s Schnabel: Upside Risks to Inflation Dominate, Should Keep Steady Hand

15 September 2025

By Marta Vilar – MADRID (Econostream) – European Central Bank Executive Board member Isabel Schnabel said on Monday that the ECB should keep a steady hand and that small deviations from the inflation target should be allowed.

Speaking at the Chief Economists’ meeting of the European Investment Bank in Luxembourg, Schnabel noted that “[i]nterest rates are in a good place as inflation stabilises around our 2% target and the economy remains resilient at full employment,” according to slides released by the ECB.

Her presentation described the global economy as “still resilient,” while warning that tariffs could push inflation higher due to supply chain integration, even though their overall effect on exports remains uncertain.

“Economy [is] to expand above potential growth, creating upward pressure on prices,” the slides said.

The stronger euro and the diversion of low-cost Chinese goods were not expected to have a significant disinflationary effect, she said.

“So far little evidence of China dumping exports, while the pass-through of a stronger exchange rate is likely to be limited,” she said.

Schnabel stressed that the main risks to inflation remained skewed to the upside, citing tariffs, services inflation, food costs and fiscal policy.

“Monetary policy should keep a steady hand, tolerating moderate deviations from target,” she added.