ECB Schnabel: Influence of energy price spike may not drop out as quickly as it moves in

ECB Executive Board member Isabel Schnabel commented yesterday on the challenges of underlying inflation in the Eurozone, noting that it has proven “sticky” and may not be significantly impacted by the recent fall in energy costs.

Schnabel stated that the influence of the energy price spike “may not drop out as quickly as it moves in” and added that “it’s not even clear whether it’s going to be completely symmetric in the sense that everything is even going to drop out at all.”

Regarding monetary policy, Schnabel acknowledged that the ECB possesses “a bit of flexibility” and emphasized that the central bank’s target is defined over the medium term, which prevents the need to “cause unnecessary pain.”

As for the recent crisis, Schnabel observed that there has been a shift from overnight deposits to time deposits, but no general deposit outflow from banks, suggesting the banking sector remains relatively resilient. She also noted that the crisis could have a disinflationary effect that the ECB must consider, but the magnitude of that effect remains uncertain at this time.