ECB Executive Board member Isabel Schnabel said today that interest rates are “in a good place” as inflation stabilizes near the 2% target and the Eurozone economy shows resilience at full employment. She cited strong household and corporate balance sheets, reduced uncertainty, and fiscal expansion as key supports to domestic demand, offsetting the drag from weaker net exports.
Schnabel downplayed concerns over Chinese export dumping, noting little evidence so far, and argued that the inflationary pass-through from a stronger Euro is likely to remain “limited”.
In her view, “upside risks to inflation dominate”, with tariffs, sticky services and food prices, and expansionary fiscal policy among the potential drivers.
Given these conditions, Schnabel said monetary policy should “keep a steady hand,” tolerating moderate deviations from target while guarding against persistent upside risks.
