In an interview with Reuters, ECB Executive Board member Isabel Schnabel remarked that the slowdown to 2.4% in Eurozone’s November flash CPI a “very pleasant surprise.” More importantly, that made “further rate increase rather unlikely”.
Schnabel emphasized the significance of the decline in “underlying inflation”, which has proven “more stubborn”, is now also “falling more quickly than we had expected”. Such trends have bolstered her confidence in achieving ECB’s 2% inflation target no later than 2025.
However, she cautioned against premature victory declarations over inflation, expecting some upticks in the coming months due to fiscal changes and base effects, and not ruling out potential new spikes in energy or food prices.
On the growth front, Schnabel acknowledged mixed signals. While some hard data points are concerning, softer indicators, like PMI, are showing signs of stabilization and are “giving us hope.”
She forecasts a gradual uptick in growth next year, driven by rising real incomes, which should boost confidence and consumption. Regarding the labor market, she noted some softening but does not anticipate a significant deterioration or a deep, prolonged recession.
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