MNI BRIEF: Persistent Inflation Means Tighter Policy -Schnabel

Inflation risks remain tilted to the upside, reflecting both supply- and demand-side factors, with risk management suggesting uncertain persistence of price pressures leans in favour of a tighter monetary policy stance, ECB Executive Board member Isabel Schnabel said in a speech Monday.

Playing down somewhat the central bank's recent forecast round, Schnabel said "a narrow reliance on projections can lead to large policy mistakes", and that more weight should be given to observable data at times of high uncertainty, helping improve the quality of policy decisions. (See MNI WATCH: ECB Signals More Hikes, Raises Inflation Projection)

"We need to remain highly data-dependent and err on the side of doing too much rather than too little," Schnabel said. "Risks of both a de-anchoring of inflation expectations and weaker monetary policy transmission suggest that there is a limit to how long inflation can stay above our 2% target," she added.

All in all, "we thus need to keep raising interest rates until we see convincing evidence that developments in underlying inflation are consistent with a return of headline inflation to our 2% medium-term target in a sustained and timely manner," she concluded.