In a speech today, ECB Executive Board member Isabel Schnabel addressed the recent declines in inflation across parts of the Eurozone, describing them as “welcome developments.” However, she cautioned that the “current level of headline inflation understates the challenges monetary policy is still facing.”
Schnabel highlighted that domestic inflation remains elevated at 4.4%, driven largely by “persistent price pressures in the services sector,” where disinflation has stalled since last November. She pointed out that the continued high inflation momentum, particularly the annualized three-month-on-three-month change, indicates that services prices are still rising at a significant pace of almost 5%.
Schnabel noted that while incoming data broadly supports ECB’s baseline outlook, caution is needed as policy rates approach the upper band of the neutral rate, “the less certain we are how restrictive our policy is”
The pace of policy easing, she emphasized, “cannot be mechanical” and must be guided by data and analysis to ensure that monetary policy does not itself become a factor hindering disinflation.
![Pinterest](https://pinterest.com/pin/create/button/?url=https://www.actionforex.com/live-comments/565777-ecbs-schnabel-rate-cuts-cant-be-mechanical-amid-stubborn-domestic-inflation/&media=https://www.actionforex.com/wp-content/uploads/2018/04/f-ecb13.jpg&description=In a speech today, ECB Executive Board member Isabel Schnabel addressed the recent declines in inflation across parts of the Eurozone, describing them as "welcome developments." However, she cautioned that the "current level of headline inflation understates the challenges monetary policy is still facing."){kind=link}