The European Central Bank is approaching a breakdown of interest cuts, since it is not clear that monetary policy remains restrictive and the increases in energy prices increase the risks of inflation, said Isabel Schnabel, a member of the Board of Directors of the ECB, a member of the ECB, said, in financial times.
The ECB has cut the interest five times since last June and the markets include three other cuts this year, given the moderation of prices on prices. But some authorities, such as Schnabel, have increasingly manifested themselves on the need for caution.
“We are approaching the point where we could have to pause or stop our cuts of interest,” said Schnabel according to FT on Wednesday. “I’m not saying that we got there. But we have to start the discussion.”
Part of the application is that at 2.75%, the ECB deposit rate may no longer limit the economic activity, although inflation has not yet returned to the lens of 2%.
The ECB has already removed a reference to the desire to maintain the “restrictive” policy, which fueled a debate on where the restriction ends, a level difficult to define and above all subjective.
“The data show that the degree of restriction has decreased significantly, up to a point where we can no longer say that our monetary policy is still restrictive,” said Schnabel.
He said that the neutral interest rate, which does not limit or stimulate growth, could also be increased in recent years and its discharge can continue due to important structural challenges such as high debt and green transformation.
Schnabel has also warned that a recent increase in natural gas prices could delay the yield of 2%inflation, the ECB projection should be reached at the beginning of the second half.
“I see the risks for our prospects on inflation as a little inclined,” said Schnabel. “Therefore, I would not exclude the possibility that the inflation returns to 2% later than we had foreseen.”
Source: Terra
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