FRANKFURT (Dow Jones) — In view of the high inflation in the euro area, ECB Director Isabel Schnabel believes it is necessary to adjust monetary policy. “Now it’s not enough to talk, we have to act,” she said in an interview with the Handelsblatt. “From today’s perspective, I think a rate hike in July is possible.” Before that, the net purchases of bonds should be stopped, probably at the end of June.
The ECB last raised interest rates in the euro area in 2011, but corrected this step a short time later, according to the newspaper. In other countries such as the USA and Great Britain, the central banks have already raised interest rates this year. The reason is the worldwide increase in inflation, which reached a record high of 7.5 percent in the euro area in April. According to Schnabel, the rise in prices is not just limited to energy and food. “We are seeing inflationary pressures broadening,” she told the newspaper.
There is no doubt that higher wage demands would come if inflation stayed high for a longer period of time. However, wages and prices are not yet mutually inflating. Monetary policy must act with foresight, she said. “We must not wait until a wage-price spiral has already started.”
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(END) Dow Jones Newswires
May 03, 2022 13:19 ET (17:19 GMT)