FRANKFURT (Reuters) – The European Central Bank will keep raising borrowing costs until it sees core inflation decline sustainably, ECB board member Isabel Schnabel said on Tuesday, adding market expectations for rate cuts were misplaced.
Schnabel backed the ECB’s decision last week to slow down the pace of rate hikes but said these will continue until it sees a sustained fall in core prices, which typically exclude food and energy due to their wild swings.
“Based on today’s data, there is no doubt that we have to do more to bring inflation back to our 2% target in a timely manner,” Schnabel told an event in Frankfurt.
“We will raise rates decisively until it becomes clear that core inflation is also declining on a sustained basis.”
She added rates will probably stay high for long and the rate cuts expected by some market participants this year were “highly unlikely”.
In her presentation, Schnabel also said inflation momentum in the euro zone remained high for all items except energy, and price pressures were broadening to most components in the consumption basket.
While supply-side shocks from bottlenecks and energy prices continued to fade, the labour market was strong, wage growth was picking up and corporate profit margins were high, Schnabel added.
(Reporting by Francesco Canepa and Balazs Koranyi; Editing by Chris Reese and Andrea Ricci)
