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Schnabel Not Ruling Out Further Rate Hikes

ECB

ECB's Schnabel has delivered a speech in St Louis in the US. Given the current monetary stance, Schnabel stated that inflation should be back to 2% by 2025. The long period to get inflation back to target reflected stickier underlying inflation conditions. Labor shortages and a higher proportion of service in aggregate activity are complicating factors from an inflation standpoint, Schnabel stated (RTRS).

  • Two conditions have to be met to bring inflation back to the ECB's target, lower unit labor costs and firms have to absorb higher wages via profit margins.
  • Inflation expectations are also fragile, while fresh supply side shocks (with the Middle East situation raised as one risk) could cause fresh destabilization to the inflation outlook. Therefore, the door to future rate hikes can't be closed (see this BBG link).
  • Finally, the Euro area is stagnating but not in a deep recession.
EM BulletFixed Income BulletsHomepageBulletMarketsEmerging Market NewsForeign Exchange BulletsEuropean Central Bank (ECB) Market News
EM BulletFixed Income BulletsHomepageBulletMarketsEmerging Market NewsForeign Exchange BulletsEuropean Central Bank (ECB) Market News

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