Schnabel Stresses Importance Of Productivity Growth

ECB Schnabel's speech titled "From laggard to leader? Closing the euro area’s technology gap" can be found here. We note the following passages on the importance of productivity growth in bringing inflation to target:

• "Persistently low, and recently even negative, productivity growth exacerbates the effects that the current strong growth in nominal wages has on unit labour costs for firms (Slide 12, right-hand side). This increases the risk that firms may pass higher wage costs on to consumers, which could delay inflation returning to our 2% target".
• "In this environment, monetary policy needs to remain restrictive until we can be confident that inflation will sustainably return to our medium-term target".
• "New estimates show that an increase in trend productivity growth by one percentage point can increase r* by 0.6 percentage points"