ZURICH (MaceNews) – Currently surging inflation is seen peaking in November and then moving lower to once again fall below two percent, ECB governing council member Isabel Schnabel said in an interview Monday with Germany’s ZDF broadcaster.
Inflation in the coming year will recede in direction of the ECB’s goal of 2 percent and many forecasts see them below that, Schnabel said. Therefore, we can see “no signs inflation is out of control.”
Schnabel said she can well understand that people are concerned over very high prices currently, and due to the pandemic and we can see that in higher prices in many sectors of the economy.
But one has to understand this is because of the unusual economic situation due to the pandemic, and after lockdown ended the economy recovered “surprisingly quickly.” Demand increased and businesses could not keep up with demand which led to supply bottlenecks.
Schnabel also noted that high inflation rates are in part due to comparing today’s prices with those of a year ago when they were particularly low. But when comparing to pre-pandemic prices then the average price increase roughly two percent in Germany.
Supply bottlenecks will ease and also energy prices won’t rise at the same tempo. Additionally, statistical special effects will eventually fall out of the calculations.
“That means inflation won’t continue at the same pace,” Schnabel said adding that one has to understand the ECB is obligated to price stability and if inflation is sustained above two percent the ECB has to react in a “determined” way.
Schnabel warned against raising interest rates too soon, however, noting that the ECB certainly has the tools to tighten monetary policy but at the moment it would a mistake to raise interest rates too soon and slow the recovery. Doing so would lead to higher unemployment and not change anything on the currently high inflation rates.
Surveys conducted by the ECB of businesses indicate that supply bottlenecks will last longer than originally expected, and in some sectors will last well into next year. Overall, however, these bottlenecks will ease, she said.
The interview was conducted in German.
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