ECB's Schnabel rejects small rate hikes

Many European Central Bank (ECB) officials have spoken out against sharp interest rate hikes. However, Isabel Schnabel, a member of the ECB's board member, has a different opinion from her colleagues on the issue, which she claimed Thursday. She stressed that smaller hikes wouldn’t help to curb inflation.

Over the last two meetings, the ECB raised interest rates by 75 basis points in order to cope with continuously rising inflation. However, some officials who usually favor sharp hikes have changed their mind. Thus, there are more and more proponents of moderate rate hikes at the ECB. Isabel Schnabel, a strong supporter of tight policy, believes that the time for smaller increases hasn’t come yet. Moreover, at this particular moment such actions would only harm the economy.

Analyzing the incoming data, Schnabel believes that a soft policy is impossible now. In her view, it will continue to be difficult even after approaching a "neutral" rate. In addition, Schnabel noted that expectations of interest rate cuts are distancing the ECB from its main goal, which is to return inflation to the target level of 2%.