The European Central Bank Executive Board member Isabel Schnabel, during a scheduled speech this Monday, said that inflation will noticeably decrease as soon as next year.
Sentiment in the euro area is brightening.
People are understandably worried about inflation developments.
Should inflation sustainably reach our target of 2% unexpectedly soon, we will act equally quickly and resolutely.
We will only start the normalisation process when we are confident of reliably reaching our inflation target.
A premature monetary policy tightening in response to a temporary rise in inflation would choke the recovery.
Against the background of rising inflation rates, particularly in Germany, it was a matter of concern to me to alleviate people’s concern that inflation may remain persistently too high.
In all likelihood, inflation will noticeably decrease as soon as next year.
There are good reasons to assume that the current constellation of fiscal and monetary policy in the euro area may finally chart the path out of the low-interest rate environment.
In view of the extremely low level of inflation last year, the current inflation rates should be interpreted with caution.
Inflation in the euro area, and also in Germany, is likely to ease noticeably next year.
We will vehemently counter persistent upward and downward deviations from our inflation target.
We will act carefully and cautiously in the current environment in order to finally pave the way out of the low-interest rate environment after so many years.
If we adjust for the base effects from the pandemic, inflation today remains too low rather than too high.
The shared currency had a rather muted reaction to Schnabel’s remarks and remained at the mercy of the US dollar price dynamics. The EUR/USD pair has managed to rebound a bit from over two-week lows touched earlier this Monday and was last seen trading just below the 1.1800 mark, still down around 0.20% for the day.
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