ECB's Schnabel signs of supply chain disruptions are re-emerging
- Rapidly growing share of European manufacturing firms are planning to increase prices.
- Household inflation expectations are adapting rapidly.
- If energy price shock broadens, monetary policy will need to tighten.
- Price shocks are likely to feed through the economy faster than in 2021.
- This risk has increased in recent weeks.
Context
The remarks from ECB's Schnabel suggest a hawkish shift in outlook due to emerging supply chain disruptions that could intensify inflationary pressures. A growing likelihood of widespread price shocks may compel the ECB to reassess its monetary policy stance sooner than previously expected, particularly if household expectations indicate a sustained uptick in inflation. This environment may lead to tighter monetary conditions across the Eurozone, impacting yields and the euro's trajectory.
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