The central banker does not see the risk of inflation as yet banned.
(Photo: Reuters)
Frankfurt The prospects for the economy in the euro zone continue to deteriorate. Isabel Schnabel, Member of the Governing Board of the European Central Bank (ECB), also expects significant burdens for the coming months: “There are strong signs that growth will slow down and I would not rule out the possibility of a technical recession ,” said the central banker in an interview with the Reuters news agency.
This danger exists above all if energy supplies from Russia are throttled even further. Economists speak of a technical recession when economic output falls in two consecutive quarters. In the second quarter of the year, the economy in the euro area grew by 0.6 percent compared to the previous quarter.
Despite the greater risks of an economic crisis, Schnabel does not rule out another strong interest rate hike by the ECB. The central banker emphasized that the inflation outlook had not improved since the July meeting. “In July we opted for a 50 basis point hike given the inflation outlook. At the moment, I don’t think that outlook has fundamentally changed.”
“The worries we had in July have not been allayed”
The ECB has switched to making decisions from meeting to meeting based on current data. “Looking at the latest data, I would say that the worries we had in July have not been allayed.” The next ECB interest rate meeting is scheduled for September 8th.
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Inflation in the currency area climbed to a record 8.9 percent in July, driven by the rapid increase in energy prices and significantly more expensive food. This means that inflation is now more than four times higher than the target set by the monetary watchdogs, which is aiming for two percent inflation for the economy.
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“I would not rule out that inflation will continue to rise in the short term,” said Schnabel. The price surge is now also affecting services and industrial goods. “Even with monetary policy normalization underway, it will take some time before inflation returns to 2 percent.”
“I would not rule out that inflation will continue to rise in the short term.” Isabel Schnabel, Member of the Executive Board of the European Central Bank (ECB)
In Germany, it is relatively likely that inflation will continue to rise, said Schnabel. Some economists recently thought double-digit inflation rates in autumn were possible due to the sharp rise in gas prices and the new gas surcharge.
Stubborn inflation in the US
The US Federal Reserve is also preparing for a long fight against inflation and is leaving the extent of the next interest rate hike still open. As can be seen from the minutes of the most recent meeting in July, published on Wednesday evening European time, the monetary authorities have not yet indicated any preference as to whether they want to take another unusually large interest rate hike of 0.75 percentage points in September or an increase of half a percentage point point are left.
Rising prices
8.5
percent inflation
reported the USA in July compared to the same month last year.
At its most recent meeting on July 26th and 27th, the central bank raised the key interest rate sharply by 0.75 percentage points – as in June. It is now in a range of 2.25 to 2.50 percent. The monetary authorities assume that further increases should be appropriate. Fed Chairman Jerome Powell said after the interest rate decision that a third major rate hike in September was possible in principle.
The minutes now released state that it could take longer than anticipated for the inflation problem to resolve. US consumer prices rose in July by 8.5 percent compared to the same month last year and thus not quite as quickly as in June with an increase of 9.1 percent. The US inflation data for August, due ahead of the next monetary policy meeting of the central bank in September, should be decisive for the extent of the next interest rate hike.
More: Inflation in the euro zone climbs to a record 8.9 percent.