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MNI BRIEF: ECB Must Act Quickly To Tame Inflation - Schnabel

Monetary policy must remain firmly focused on getting inflation down to 2% “as quickly as possible,” ECB Executive Board member Isabel Schnabel said in a speech Thursday, adding that markets’ expectations of a change in direction and un-targeted fiscal policy have made doing so more difficult, increasing the likelihood of persistence high inflation.

“Markets’ expectations of a “pivot” have recently worked against our efforts to withdraw policy accommodation, bringing the actual policy stance further away from the stance that is required to bring inflation back to target. This raises the risks that first round effects from higher energy and food prices eventually turn into second round effects.”

Interest rates will have to be raised into restrictive territory, Schnabel said, with the largest risk for central banks coming a policy that is "falsely calibrated on the assumption of a fast decline in inflation, and hence on an underestimation of inflation persistence." (MNI INTERVIEW: ECB To Consider Smaller December Hike - Lane)

MNI London Bureau | +44 20 3983 7894 | luke.heighton@marketnews.com
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MNI London Bureau | +44 20 3983 7894 | luke.heighton@marketnews.com
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