ECB continues to emphasize tight policy

According to European Central Bank (ECB) member Isabel Schnabel, interest rates should be raised to restrictive levels. Messages regarding a tight monetary policy stance continue to come from European Central Bank (ECB) officials. According to European Central Bank Executive Board member Isabel Schnabel, interest rates should be raised to “restrictive zones” in order to reduce inflation to target levels. In an interview with the Frankfurter Allgemeine Zeitung newspaper published over the weekend, Schnabel stated that the risk of the ECB being overly aggressive in interest rate hikes was still limited and drew attention to the fact that real interest rates were still very low. Schnabel stated that they could not yet specify a net interest rate level for the restrictive zone, and that this interest rate would mean above the neutral interest rate. ECB members had recently signaled a higher final interest rate than market expectations. Schnabel acknowledged that it would be difficult for the ECB, which has raised interest rates in the last four meetings, to reach consensus among members on the next steps. According to ECB projections, inflation will be well above the 2% target by 2025.