Latest News

ECB may need to act if energy price rises more persistent: Schnabel

© Reuters. FILE PHOTO: Isabel Schnabel, member of the German advisory board of economic experts attends the 29th Frankfurt European Banking Congress (EBC) at the Old Opera house in Frankfurt, Germany November 22, 2019. REUTERS/Ralph Orlowski

FRANKFURT (Reuters) -Rising energy prices may force the European Central Bank to stop “looking through” high inflation and act to temper price growth, particularly if the green transition proves inflationary, ECB board member Isabel Schnabel said on Saturday.

Inflation hit a record high 5% last months, more than twice the ECB’s 2% target but the bank has not tightened policy so far, arguing that price growth will abate on its own as transitory one-off factors are the main reasons for high inflation.

“The green transition poses upside risks to medium-term inflation,” Schnabel said in a speech. “Rising energy prices may require a departure from a ‘looking through’ policy.”

Schnabel said there were two scenarios in which the ECB would have to change policy.

The first one is if high energy prices feed through to other sectors of the economy and alter price setting behaviour.

“So far, however, there are no signs of broader second-round effects,” Schnabel argued. “Wage growth and demands by unions remain comparatively moderate.”

The second scenario would be if the path of energy prices, heavily impacted by carbon taxes and the green transition, threatens to push headline inflation above target.

Supply and demand imbalances may remain protracted amid the transition and carbon prices are likely to rise further, meaning that the contribution of energy and electricity prices to consumer price inflation could be above its historical norm in the medium term, Schnabel added.

Schnabel added that a carbon tax is unlikely to be a negative for economic growth and studies suggest that it could even have a modest positive impact.

ECB may need to act if energy price rises more persistent: Schnabel

Disclaimer:Fusion Mediawould like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

Schedule for Week of January 9, 2022

Previous article

Real Estate Newsletter Articles this Week

Next article

You may also like


Leave a reply

Your email address will not be published.

More in Latest News