ECB's Schnabel (Germany): do not expect to see 'excessively high' inflation; current higher inflation is temporary - press interview
- The increase in the inflation target is minimal; people needn't fear higher inflation
- A target of two per cent has an important function: it creates space so that our monetary policy can have its stabilizing effect.
- Our inflation target is symmetric: inflation may sometimes be slightly above it or below
- "The Governing Council supported this unanimously...Unanimous means unanimous."
- Inflation in Germany is now relatively high on account of the pandemic. We will see this as of July – precisely one year after the reduction in value added tax – when prices will be particularly high compared to last year, but only because prices were reduced at that time. The recovery in oil prices has a similar effect. The Deutsche Bundesbank forecasts that inflation will reach just over four per cent in Germany towards the end of this year, but will already fall again significantly next year. Given such short-term fluctuations, the ECB’s monetary policy is oriented towards medium-term price developments – across the entire euro area. Our medium-term inflation projection is subdued: only 1.4 per cent in 2023. Though that is surrounded by uncertainty, I am sure that we will not experience excessively high inflation.
- Whether inflation rises sustainably ultimately hinges on whether wages also rise and amplify inflation through second-round effects. So far we have seen little evidence of that
- We are yet to decide on the concrete effects that the new strategy will have on our current monetary policy stance. It is clear that we must achieve our medium-term inflation target in a sustainable manner. Bond purchases are part of our standard toolkit.-