As a result of the European Central Bank's inability to achieve its primary goal of considerably lowering core inflation, the process of tightening monetary policy and hiking interest rates has not yet been completed.
Isabelle Schnabel, who is a member of the executive board of the European Central Bank, has recently made this statement, having emphasized that there is still work to be done by the central bank and that the activities of the central bank, as well as the possibility of more interest rate hikes, will rely on incoming data.
Isabelle Schnabel said in a speech a week before a meeting of officials from the European Central Bank in Frankfurt that core inflation, which excludes prices for volatile goods like food and power, "is more resilient and remains far too high." Having said that, the importance of the service industry cannot be overstated because the spending on wages has a disproportionately strong impact on inflation.
The inflation rate in the euro area is still significantly higher than the ECB's target value. Since July, the central bank has hiked interest rates by 375 basis points, and two more quarter-point increases are anticipated this month and next. There is political speculation that further steps may be needed in September.
“A peak in underlying inflation would not be sufficient to declare victory: we need to see convincing evidence that inflation returns to our 2% target in a sustained and timely manner. We are not at that point yet,” Schnabel stressed.
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