(Finance) – At the ECB “we are keeping course on interest rate hikes to bring inflation back to our 2% target in a timely manner”. It’s the first response from Isabel Schnabel, member of the Executive Board of the ECB in a Twitter “dialogue” on monetary policy. “Controlling inflation is our number one priority. We have been raising interest rates at record speed and are starting to reduce our stocks of securities,” she added. There BCE it raised rates by another 50 basis points last week and at the same time reported that it was inclined to raise them by another 50 basis points at the March directorate.
“Further interest rate hikes will help bring inflation back to the target level, which, given nominal wages, will raise real wages,” Schnbel said. And rate hikes aren’t creating new poor people. “Fighting high inflation – said the member of the Executive Committee of the ECB – we are supporting sustainable growth in the euro area. The war has made it more difficult but we are doing our best to limit the consequences. The economy will not recover if inflation is exceptionally high.”
The interest rates of the ECB – he continued Schnabel – “they must reach a sufficiently restrictive level. We should see that our policies are transmitted to the economy. We will keep rates high until we see solid evidence that core inflation returns to our target, in a timely and lasting manner”.
“Since the climate change and the green transition they have effects on price stability we cannot ignore them. They are an integral part of our mandate. But governments are leading” said the member of the ECB’s executive board responding via Twitter to a controversial question on why the central bank, which has a mandate solely on price stability is “wasting time and resources on climate-related initiatives” .
“A digital euro it cannot be completely anonymous” as physical cash is, “especially for larger payments because at that point it could be used for illicit purposes – Schnabel said -. But ensuring a high level of privacy on personal data and payments will be a key priority.”
In the euro area, “large-scale disinflation has not begun. We must – underlined Schnabel – use all our tools to restore price stability and support sustainable growth. Otherwise we will see even steeper declines in real wages, and we may have to raise interest rates even more.”
“A soft landing for the euro area economy is possible but not guaranteed. Tighter financing conditions are holding back economic demand and thus activity. This does not necessarily lead to a recession,” Schnabel said.
“We cannot claim victory over inflation containment yet. This – said the member of the Executive Committee of the ECB – is why we need to stay the course and raise rates significantly again. Whether another 50 basis point hike is needed (in May) will depend on the data that comes in and our assessment of the inflation outlook.”
THE advantages of the euro? “It makes trade and travel easier.” No longer being able to attribute the merit of guaranteeing low inflation to the single currency, these are the positive aspects with which Schnabel she replied to those who asked her (via Twitter) what the advantages were for a country to join the single currency. “The euro – she said – removes fluctuations on the exchange rate and therefore makes travel and trade easier”. “And even though inflation is far too high, the euro has on average ensured more price stability than national currencies previously did. The euro is a symbol of our unity.”