Remarks by ECB executive board member, Isabel Schnabel
- Inflation likely to ease noticeably next year
- If we adjust for base effects, inflation today remains too lower rather than too high
- Current inflation rates should be interpreted with caution
- People are understandably worried about inflation developments
- ECB will counter persistent upward, downward deviations from inflation target
- Will only start normalisation process when confident of reliably reaching 2% target
- Premature policy tightening would choke the recovery
To sum up, ECB policymakers are still maintaining their view that inflation is very much 'transitory', although the language and general undertone is seemingly less confident as they were a few months back.
Schnabel is not wrong to be pointing to base effects when viewing annual inflation, especially when it comes to Germany (VAT reduction in 2H 2020 exacerbating the annual jump), but don't discount the impact of supply chain disruptions globally still for now.
