European Central Bank executive board member Isabel Schnabel and chief economist Philip Lane insist that the surge of inflation forecast for the rest of the year will be of a temporary nature, and it does not call into question the central bank’s accommodative monetary policy.
- Schnabel admitted in an interview with RTL/NTV on Tuesday that inflation in Germany might rise above 3% this year, but added that it would only be a “short-term fluctuation” that the ECB’s monetary policy strategy has to “look through.”
- In its latest economic forecast in March, the ECB sees inflation rise sharply in the coming months, from 0.3% in 2020 to 1.5% in 2021, with a peak at the official annual target of 2% at the end of the year. But it would drop sharply to 1.2% in 2022 and 1.4% in 2023.
- Lane insisted recently in an interview that the ECB’s official “below but close to 2%” inflation target is “symmetric” and not a ceiling — i.e., that it can overshoot to compensate for periods of lower inflation. The ECB has failed to meet its current target since 2014.
The outlook: Forces are aligning for the fierce debate expected at the June meeting of the ECB’s governing council, where advocates of keeping the current asset-buying program and negative rates on track will face the criticism of the hawks arguing for an early tightening of monetary policy.
And Schnabel, a German economist by training, has taken on the role of reassuring German public opinion, whose concerns about inflation are more intense than in the rest of Europe, about the ECB’s policy and strategy.