In a Twitter Q&A, ECB Executive Board member Isabel Schnabel said, “in the 1970s rising oil prices triggered a harmful price-wage spiral, as inflation expectations drifted away.” But, “today longer-term inflation expectations are well-anchored. We will ensure that high inflation does not become entrenched.”
“Inflation will remain high for longer than anticipated. There is a risk that inflation continues to rise in the near term but it is likely to gradually decline towards the end of this year. There remains high uncertainty around the inflation outlook.”
“Raising rates would not lower energy prices. But if high current inflation threatens to lead to a de-anchoring of inflation expectations, we may still need to respond, as our mandate is to preserve price stability.”
“Monetary policy has to keep a watchful eye on all factors, including energy, that affect the medium-term inflation outlook. An extended period of high energy price inflation may lead to expectations of higher inflation in the future.”
