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ECB: Schnabel Wary Of Services Inflation

ECB
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Board member Schnabel doesn’t explicitly express a view on appropriate monetary policy but her slides appear consistent with her comments Aug 30 that “policy should proceed gradually and cautiously” and become increasingly cautious as policy rates get to the upper band of neutral estimates.

  • She is clearly still wary of services inflation: “Sticky services inflation is keeping headline inflation at elevated level”, “Price pressures in the services sector are broad-based and global” and “Momentum in services remains high and above levels consistent with price stability”.
  • Further, “Inflation perceptions remain high, making expectations more fragile to new shocks” although “Firms expect selling price increases to moderate as profit margins buffer higher wages”.
  • “Wage growth expected to slow down as past price shocks unwind“ but “Labour demand remains high amid low unemployment and persisting labour shortages”.
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Board member Schnabel doesn’t explicitly express a view on appropriate monetary policy but her slides appear consistent with her comments Aug 30 that “policy should proceed gradually and cautiously” and become increasingly cautious as policy rates get to the upper band of neutral estimates.

  • She is clearly still wary of services inflation: “Sticky services inflation is keeping headline inflation at elevated level”, “Price pressures in the services sector are broad-based and global” and “Momentum in services remains high and above levels consistent with price stability”.
  • Further, “Inflation perceptions remain high, making expectations more fragile to new shocks” although “Firms expect selling price increases to moderate as profit margins buffer higher wages”.
  • “Wage growth expected to slow down as past price shocks unwind“ but “Labour demand remains high amid low unemployment and persisting labour shortages”.