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Schnabel prefers the ECB to go overboard with rate hikes rather than fall short

Date: June 18, 2024 Time: 23:57:17

The German representative on the board of the European Central Bank (ECB), Isabel Schnabel, has defended the need to continue raising interest rates until there is convincing evidence that the headline inflation rate returns to the 2% target on a sustained basis and opportunely, pointing out that it is better to “do too much than do too little”.

“We must continue to be highly dependent on data and err on the side of doing too much instead of doing too little,” the German ECB executive has defended. In this sense, for Schnabel the costs of protecting the economy from upward risks to inflation are comparatively small, since rates can return to neutral levels more quickly.

Also, it is very costly for the economist to react after the upside risks to inflation have materialized, as this could destabilize inflation expectations and therefore requires a more pronounced contraction in output to restore inflation. price stability.

“Therefore, we should continue to raise interest rates until we are satisfied that underlying exposure developments are consistent with a return of headline exposure to our 2% medium-term target on a sustained and timely basis.” announced.

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Puck Henry
Puck Henry
Puck Henry is an editor for ePrimefeed covering all types of news.

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