Unraveling Markets Pose Challenges to ECB's Efforts, Warns Schnabel

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Euro Zone Growth Weaker Than Predicted, Says ECB Board Member Isabel Schnabel

Member of the German advisory board of economic experts Isabel Schnabel poses ahead of a news conference in Berlin

Member of the German advisory board of economic experts Isabel Schnabel poses ahead of a news conference in Berlin, Germany, November 6, 2019. REUTERS/Fabrizio Bensch/File Photo

Euro Zone Growth Weaker Than Predicted

  • Euro zone growth is weaker than predicted just a few months ago

Rate Hikes and Investor Reactions

  • Investors are undoing some of the European Central Bank's past work
  • ECB board member Isabel Schnabel says this does not automatically void the need for more rate hikes

Debate on Rate Hikes

  • The ECB has raised rates at each of its policy meetings in the past 13 months
  • Policymakers are debating whether to pause or to hike again to put inflation firmly on course to 2%

Arguments for More Rate Hikes

  • Isabel Schnabel acknowledges the growth headwinds
  • She raises several arguments suggesting that the job may not be done

Market Revisions and the ECB's Efforts

  • Markets have revised their rate expectations on the weaker growth outlook
  • This may have undone the ECB's past efforts, possibly requiring more action

Dismissing the "High for Longer" Premise

  • Isabel Schnabel dismisses the idea of trading another rate hike for a promise to hold rates even longer
  • She argues that such a promise would raise time inconsistency issues

Signs of Tightness in the Labor Market

  • Indicators are signaling "unprecedented tightness" in the labor market
  • Labor shortages can lead to steeper wage increases, fueling inflation

No Indications of a Deep or Prolonged Recession

  • Isabel Schnabel argues that even if growth is weak, there are no indications of a deep or prolonged recession in the euro zone

Reporting by Balazs Koranyi; Editing by Alison Williams and Alex Richardson

https://megazineusa.com/markets/unraveling-markets-pose-challenges-to-ecbs-efforts-warns-schnabel/?feed_id=88360&_unique_id=64f04985b1701

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