(Original title: European Central Bank Executive Board says interest rate hikes are far from over and interest rates will be forced above neutral levels)
December 27 Associated Press news (Editor Zhao Hao)European Central Bank executive Isabel Schnabel said interest rates would need to move into “tight territory” to bring inflation back to the bank’s target.
Schnabel said in an interview published by German media on Saturday (Dec. 24) that since real interest rates are still low, the risk of excessive tightening by the ECB is limited.
Not long before the interview, the European Central Bank announced in its last interest rate resolution of the year that it would raise its three key interest rates by 50 basis points and the interest rate hit its highest level since December 2008.
Looking back on four consecutive interest rate hikes this year, Schnabel said this is what the central bank needs to do to get inflation back to 2%. You also reiterated Gov. Christine Lagarde’s position that the cycle of rate hikes will continue “for some time.”
Regarding the end point of the rate hike, Schnabel said, “By our estimates, this rate needs to be in restrictive territory, which is one level above the neutral rate.” Reaching consensus is not easy.
Earlier this year, the ECB, like major central banks like the Fed, underestimated the persistence of inflation. Signs of rising inflation weren’t considered internally enough at the time, Schnabel noted, eventually allowing for “too high” to be replaced by “too low” as the primary risk.
He explained that in the beginning, many people feared that premature monetary policy could lead to a slowdown or recession of the economy, and also underestimated the impact on prices of the easing of new corona restrictions by European countries. Subsequently, some people thought that the supply chain bottleneck would be resolved sooner, but the fact is that it lasted longer than expected.
Inflation in the euro area could remain “significantly” above 2% until 2025, according to the latest ECB forecasts. Schnabel called this long period of high inflation problematic and the ECB could hardly claim to have achieved its price stability objective.
Also on Saturday local time, Pierre Wunsch, the governing council of the ECB and president of the Belgian central bank, told local media: “The consensus within the ECB is very clear that we are still far from a sufficiently restrictive monetary policy “.
Looking ahead, Schnabel expects growing opposition to rate hikes due to the impact on the finances of some governments, including Italy’s, which has started to object strongly: “We have to bear with it, this is central bank independence.” . . “
