On Monday, isabelle schnabela member of the Governing Council of the European Central Bank (ECB), stated that, due to the upward risks to the inflation outlook, “we must continue to rely heavily on data and err on the side of excess rather than deficiency,” according to reports Reuters.
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“The path to sustained price stability remains uncertain and fraught with risk.”
“Profit margins are expected to absorb rising labor costs.”
“The rules suggest that the optimal interest rate path would have been steeper.”
“The fact that we underestimated the persistence of inflation last year increases the likelihood that we are underestimating it today as well.”
“Giving more weight to observable data, particularly in times of high uncertainty, can improve the quality of policy decisions.”
“The risks of both an unanchoring of inflation expectations and weaker monetary policy transmission suggest there is a limit to how long inflation can stay above 2%.”
“So we should keep raising interest rates until we see convincing evidence that core inflation developments are compatible with a return of headline inflation to our 2%.”
Market reaction
These comments did not boost the Euro. At press time, the EUR/USD pair was down 0.2% to 1.0920.
Source: Fx Street
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