Schnabel, the ECB's most influential policymaker and a supporter of tighter monetary policy, has struck a cautious tone, even as many of his colleagues are already considering further rate cuts.
“We still expect inflation to gradually approach our 2% target over the course of next year,” Schnabel told German daily Frankfurter Allgemeine Zeitung.
“However, the continued inflation of services shows that the last mile of the fight against inflation is particularly difficult,” he added in the interview.
After cutting in June, the European Central Bank left interest rates unchanged last week. However, President Christine Lagarde said the option was open at the September meeting, and many policymakers are publicly considering further cuts as inflationary pressures ease.
According to Schnabel, “some of the data… did not fully meet” the ECB's expectations at the time of the June rate cut, and a full series of additional rate cuts will not automatically follow.
“The pace of rate cuts will depend on the data,” he said.
Schnabel’s last-mile narrative was the subject of lively discussion at the ECB’s policy symposium earlier this month. Indeed, an academic study predicted an “easy last mile” for the eurozone central bank.
Eurozone inflation was 2.5% in June. July data will be published on Wednesday. It will be important for the European Central Bank to monitor this data in order to make appropriate decisions on future monetary policy.
Source: Reuters
Cover image is an illustration. Cover image source: Getty Images
