ECB’s Schnabel: Inflation on track, economy resilient, bar for further rate cut very high

ECB Executive Board member Isabel Schnabel signaled in an interview with Econostream Media that there is urgency for further easing. Schnabel noted that inflation is now projected to be at 2% target over the medium term, and expectations remain “well anchored”, while interest rates are in a “good place”. She added that “the bar for another rate cut is very high”.

Schnabel emphasized that there is “no risk of a sustained undershooting” and that core inflation is forecast to meet target throughout the horizon. She also downplayed concerns over the disinflationary impact of Euro strength, calling such fears “exaggerated” given limited pass-through effects. Schnabel argued that temporary factors such as low energy inflation are unlikely to derail the ECB’s price stability goals.

On the growth front, Schnabel was notably upbeat. Recent PMI data suggesting further recovery ahead. Manufacturing indicators such as new orders and export demand have all reached three-year highs, pointing to more than just temporary momentum. Combined with record-low unemployment and the expectation of a large fiscal impulse, she argued that risks to the growth outlook are now “more balanced”, reducing the case for near-term rate action.

Full interview of ECB’s Schnabel here.