ECB’s Schnabel pushes back on smaller rate hikes By Reuters
Economy 16 minutes ago (Nov 24, 2022 14:02)
© Reuters. FILE PHOTO: Isabel Schnabel, member of the German advisory board of economic experts attends the 29th Frankfurt European Banking Congress (EBC) at the Old Opera house in Frankfurt, Germany November 22, 2019. REUTERS/Ralph Orlowski//File Photo
LONDON (Reuters) – European Central Bank board member Isabel Schnabel pushed back on Thursday against calls from many of her colleagues for smaller interest rate increases by the ECB, saying this could hamper efforts to bring down inflation.
The ECB, determined to tackle runaway prices, has increased rates by a record 75 basis points at its last two meetings but several central bank governors, including some who normally favour higher rates, have opened the door to a gentler pace.
However Schnabel, the most influential voice in the hawkish camp, said this was premature and could even prove counter-productive.
“Incoming data so far suggest that the room for slowing down the pace of interest rate adjustments remains limited, even as we are approaching estimates of the ‘neutral’ rate,” she told an event in London.
“The extraordinarily large degree of uncertainty surrounding such estimates implies that they cannot serve as a yardstick to inform the appropriate pace of interest rate adjustments. Instead, policy needs to remain data-dependent.”
She argued that expectations for a shallower rate path are even working against the ECB, taking the actual policy stance further away from what is required to bring inflation back to its 2% target.
Earlier this week, Austria’s Robert Holzmann, the most outspoken hawk at the ECB, backed a further 75 basis point increase, but the Netherlands’ Klaas Knot and Germany’s Joachim Nagel appeared to be open to a 50-basis-point hike, as is expected by financial markets.
Speaking in Milan just before Schnabel, ECB vice-president Luis de Guindos said the next move would depend on the data but said he did not expect eurozone inflation to rise much further. It hit 10.6% in October.
“For headline (inflation)… I think that we’re there in terms of the peak, perhaps one decimal point up or down, it will be hovering, but I think that in the first half of next year we will see a decline,” he told an event.
Policymakers have been adamant that rates need to increase further but they can’t fully agree on their ultimate destination or pace, the account of their last meeting showed on Thursday.
“A discussion took place on the use of concepts such as the ‘neutral rate’ or the ‘terminal rate’ consistent with inflation returning to target over the medium term, with different views expressed on the link between these measures and projection scenarios or on their steady state properties,” the ECB said in the account.
Dutch governor Knot expressed doubts over market expectations for the ECB’s deposit rate, currently at 1.5%, to peak at 3%.
“Market expectations are that we will raise rates up to 3% in the first half of next year, and that they will go down from the second half of 2023. In all honesty, I’m not sure about that,” Knot told a hearing at the Dutch parliament.
ECB’s Schnabel pushes back on smaller rate hikes
LONDON (Reuters) – Britain still has work to do to restore its international reputation after the turmoil which followed finance minister Kwasi Kwarteng’s Sept. 23 mini-budget,…
By Balazs Koranyi and Karin Strohecker FRANKFURT (Reuters) – The Federal Reserve’s signalling of a slowdown in the pace of U.S. interest rate hikes takes pressure off global peers…
By Farouq Suleiman and Sachin Ravikumar LONDON (Reuters) -Net migration to the United Kingdom rose to a record high of around 504,000 in the year to June 2022, official statistics…
© 2007-2022 Fusion Media Limited. All Rights Reserved.
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.