ECB Executive Board member Isabel Schnabel stressed the importance of a cautious approach to monetary easing, warning against shifting policy into “accommodative territory.”
Speaking to Bloomberg, Schnabel stated that ECB could “gradually move toward neutral” if incoming data continue to align with the bank’s baseline projections. However, she rejected market expectations for accommodative policy, remarking, “From today’s perspective, I do not think that would be appropriate.”
Schnabel also dismissed speculation about larger rate moves, such as half-point cuts, expressing “a strong preference for a gradual approach.”
She cautioned that cutting rates prematurely, even if inflation were to fall short, could be counterproductive if deeper structural issues underlie the economic weakness.
In her view, “the costs of moving into accommodative territory could be higher than the benefits,” particularly as it would deplete policy options needed for future shocks that monetary measures could address more effectively.
Schnabel estimates the neutral interest rate to fall within the 2% to 3% range. With the deposit rate currently at 3.25% after three quarter-point cuts this year, she noted, “we may not be so far” from neutrality now.
