With the central bank now signaling a higher final interest rate than many market participants expected, “reaching consensus” on next steps “certainly wouldn’t be easier,” Schnabel said.
The German official said the European Central Bank had downplayed the importance of continued inflation previously and “didn’t initially take signs of rising inflation seriously enough” because it went from a stage where inflation very low was the main risk and uncertainty associated with the pandemic cast a shadow on monetary policy decisions.
“There was concern that premature monetary policy measures could unnecessarily push the economy into another recession,” he added.
Schnabel said “many people” underestimated the price hike as COVID-19 measures wore off, thinking supply chain disruptions would be resolved more quickly. But the situation took much longer than expected.”
Eurozone inflation hits all-time high as recession fears mount
