ECB’s Schnable: Rate hikes wouldn’t lower energy prices

Isabel Schnabel, member of the Executive Board of the European Central Bank (ECB), mentioned during a Twitter session of Q&A that rising interest rates would not lower energy prices. She added that if current inflation “threatens to lead to a de-anchoring of inflation expectations, we may still need to respond”. According to her, inflation will remain high for longer than anticipated.

Additional Remarks:

“Money is a medium of exchange, a unit of account and a store of value. “Good” money fulfils all three functions. The euro is “good” money: it enjoys high trust in the euro area and beyond”.

“Asset purchases under the PEPP are guided by the ECB’s capital key. In the event of renewed market fragmentation related to the pandemic, PEPP reinvestments can be adjusted flexibly across time, asset classes and jurisdictions at any time.”

“Raising rates would not lower energy prices. But if high current inflation threatens to lead to a de-anchoring of inflation expectations, we may still need to respond, as our mandate is to preserve price stability.”

“Inflation will remain high for longer than anticipated. There is a risk that inflation continues to rise in the near term but it is likely to gradually decline towards the end of this year. There remains high uncertainty around the inflation outlook.”