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MNI BRIEF: Global Factors Driving EU Inflation, ECB's Schnabel

(MNI) London

Inflation has become less sensitive to domestic slack and more sensitive to global factors, ECB Executive Board member Isabel Schnabel said in a speech Wednesday, with current conditions giving rise to the risk of a de-anchoring of inflation expectations to the upside.

The Covid-19 pandemic and Russia’s invasion of Ukraine offer evidence that while economic slack may differ across economies, a failure to properly account for global factors may result in significant forecasting errors, she said.

“Large and persistent global shocks can destabilise inflation expectations even if the main source of expansion or contraction stems from abroad,” Schnabel said. “By responding swiftly and decisively to these risks, monetary policy can secure price stability over the medium term, thereby avoiding the much higher economic cost of acting too late.”

MNI London Bureau | +44 20 3983 7894 |
MNI London Bureau | +44 20 3983 7894 |

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