ECB’s Schnabel sees more rate hikes until core inflation declines too
2023.05.09 16:23
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© Reuters. FILE PHOTO: The European Central Bank (ECB) in Frankfurt, is photographed during a heavy rain storm ahead of the ECB council meeting later this week, Germany, March 14, 2023. REUTERS/Kai Pfaffenbach
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FRANKFURT (Reuters) – The European Central Bank will keep raising borrowing costs until it sees core inflation decline sustainably, ECB board member Isabel Schnabel said on Tuesday, adding market expectations for rate cuts were misplaced.
Schnabel backed the ECB’s decision last week to slow down the pace of rate hikes but said these will continue until it sees a sustained fall in core prices, which typically exclude food and energy due to their wild swings.
“Based on today’s data, there is no doubt that we have to do more to bring inflation back to our 2% target in a timely manner,” Schnabel told an event in Frankfurt.
“We will raise rates decisively until it becomes clear that core inflation is also declining on a sustained basis.”
She added rates will probably stay high for long and the rate cuts expected by some market participants this year were “highly unlikely”.
In her presentation, Schnabel also said inflation momentum in the euro zone remained high for all items except energy, and price pressures were broadening to most components in the consumption basket.
While supply-side shocks from bottlenecks and energy prices continued to fade, the labour market was strong, wage growth was picking up and corporate profit margins were high, Schnabel added.
