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Daiwa Capital Markets: ECB Schnabel's Comments More Hawkish Than Of Late

ECB
Daiwa Capital Markets: Schnabel Mindful Of Risks To The Inflation Outlook, Which Might Eventually Justify Tighter Policy
  • The assessment that economic conditions are unlikely to merit an ECB rate hike next year was repeated today by highly influential Executive Board member Isabel Schnabel. But her speech was more hawkish than other recent commentary from Executive Board members.
  • Given recent developments and the significant uncertainty surrounding the inflation outlook, she considered it "not surprising that uncertainty around the future path of short-term interest rates as priced by investors has increased over the past few weeks".
  • She also acknowledged structural changes in the global economy - not least the green transition - that could enable higher inflation to become more persistent and broad-based going forward.
  • Such changes might well in due course merit earlier monetary tightening than suggested by the Governing Council's central projection. So, Schnabel was in no mood to try to shift market pricing, instead simply suggesting that the ECB was pursuing a "risk-management approach" to monetary policy, mindful of the "entire distribution of risks" around the most likely future path of the economy and "keeping sufficient optionality to address all inflation contingencies" which might eventually crystallise.
EM BulletHomepageEmerging Market NewsEuropean Central Bank (ECB) Market NewsBulletMarketsFixed Income BulletsForeign Exchange Bullets
EM BulletHomepageEmerging Market NewsEuropean Central Bank (ECB) Market NewsBulletMarketsFixed Income BulletsForeign Exchange Bullets

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