We must strike while the iron is hot and continue to raise interest rates. This is how Isabel Schnabel, a member of the Executive Board of the European Central Bank, could be interpreted.
Interest rate hike just before Christmas
The European Central Bank’s base rate was raised just before Christmas and investors seem to expect the trend to continue in the coming year. “As long as it takes, we should go higher. It will depend on the future outlook for inflation,” Isabel Schnabel told the German newspaper Frankfurter Allgemeine Zeitung in an interview on Saturday.
Pressure on the ECB
According to her, the ECB will focus on medium-term inflation expectations rather than the current inflation situation. He said it is possible that the ECB will come under increasing pressure to ease its monetary tightening because higher interest rates make debt financing for governments more expensive. “We can expect it, but we must resist it. After all, this is exactly why central banks are independent,” Schnabel added. The ECB interest rate on bank deposits could climb to 3.4 percent next year, investors expect, according to Reuters.
