MNI BRIEF: ECB Real Rates “Not Far From Neutral” – Schnabel
MNI (LONDON) - Euro area financial conditions have eased, with real rates approaching neutral levels, European Central Bank Executive Board member Isabel Schnabel said in a presentation on Wednesday.
While the disinflation process “remains on track,” Schnabel cautioned that the fight against inflation is not over and advocated a gradual approach in removing monetary restriction. There is “no need to go below neutral”, given that growth in 2025 is forecast to be near its potential, he said.
Schnabel assessed the risk of significant and sustained undershooting of the inflation target as low, but noted that the energy shock may leave “permanent scars” on the eurozone economy. She pointed to signs of a potential recovery in consumption and some cooling in the labour market but warned that further protectionism and the weaponisation of raw materials could drive inflation higher.