'It is clear we need to keep raising rates,' ECB's Schnabel says
By Alexander Bueso
Date: Thursday 22 Sep 2022
(Sharecast News) - "It is clear that we need to continue raising rates" a top European Central Bank official said.
In an interview with T-Online, Isabel Schnabel said that "The signal we sent with our latest interest rate hike is clear: we are taking decisive steps to curb inflation and are making sure that it stabilises again at 2% in the medium term.
"However, the starting point of interest rates is very low, so it is clear that we need to continue raising rates."
Schnabel, who sits on the ECB's governing council, added however that she could not say how big the rate hike at October's policy meeting would be, nor at what level the ECB would stop hiking.
The same as her peers, the central banker attributed most of the rise in inflation to energy prices.
She also emphasised the "enormous uncertainty" the ECB had faced at the beginning of 2022, when the risk of renewed lockdowns from Omicron existed as well as after Russia invaded Ukraine.
In her judgement, it would take until 2024 in order for inflation to stabilise around the ECB's 2.0% target.
When asked which was worse, inflation or recession, she responded that the ECB had a clear mandate - price stability.
She did express "some concern" about signs that "more people expect inflation to exceed our 2% target also in the medium term."
Therefore, she said: "this makes it all the more important to send clear signals that people can rely on the ECB and that inflation will go down again".
Nonetheless, at present the ECB saw no signs of a wage-price spiral.
"Wage growth has increased, but it is still moderate."
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