ECB’s Schnabel: Central banks must pay attention to house prices

Isabel Schnabel said that house prices need more attention from financial stability and price stability viewpoint. Schnabel indicated that owner-occupied housing would have contributed between 0.4 and 0.5 pp to data released by the Harmonised Index of Consumer Prices (HICP).

The member of ECB’s executive board also insisted that monetary policy cannot turn a blind eye on loan growth in an institutional setting in which macro-prudential policies are, in principle, the first line of defense but are not yet fully effective.

It’s likely that large stock of ECB assets in conjunction with forward guidance will prevent an unwarranted tightening of long-term rates after QE.

In raising rates before ending QE, Schnabel said that central banks would be willingly accepting losses on their balance sheets that would ultimately lead to losses for the average tax payers.