ECB's Schnabel says that the memory of high inflation remains fresh, and inflation expectations could be more fragile
- Can afford to take time to analyse the Iran shock.
- We are in a relatively favourable position because we were successful in bringing down inflation to 2% before the war started, have monetary policy stance that is broadly neutral.
- To carefully consider data that may indicate inflation becoming entrenched or having second-round effects.
Context
Schnabel's comments highlight a cautious stance from the ECB regarding inflation risks, emphasizing that while inflation has been managed, expectations remain delicate. This could signal that the ECB is prepared to stay vigilant on monetary policy, potentially impacting future rate decisions and influencing the EUR as markets assess the balance of risks around inflation and growth.
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