ECB Executive Board member Isabel Schnabel signaled that the central bank is in no rush to adjust policy, emphasizing that the current stance allows time to assess the impact of the latest energy shock. Speaking in Washington on Wednesday, she said the ECB is in a “relatively favorable” position after having brought inflation back to target before the Middle East conflict, adding that “we do not need to rush into action.”
Schnabel highlighted the complexity of the current environment. While rising energy prices could prove inflationary, the Eurozone’s status as a net energy importer means higher fuel costs may simultaneously weaken growth. That dynamic could limit firms’ ability to pass on higher costs and reduce workers’ bargaining power, creating a two-sided risk where inflation and activity move in opposite directions.
Against this backdrop, she stressed the need for caution and data dependence. Policymakers must watch closely for signs that inflation could become entrenched through second-round effects, but at the same time avoid overreacting. “We have to weigh our policy decisions very carefully,” she said, warning that the ECB must not impose an “unnecessary cost” on the economy through premature tightening.
