Rate hike would be devastating: ECB’s Schnabel

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Rate hike would be devastating: ECB’s Schnabel
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Economic Indicators1 hour ago (Jan 31, 2021 06:35AM ET)

© Reuters. FILE PHOTO: 29th Frankfurt European Banking Congress (EBC) takes place in Frankfurt
© Reuters. FILE PHOTO: 29th Frankfurt European Banking Congress (EBC) takes place in Frankfurt

BERLIN (Reuters) – Raising euro zone interest rates in the current environment would have a devastating impact, European Central Bank board member Isabel Schnabel said on Sunday, adding that temporary spikes in inflation should not be confused with a trend.

Schnabel was responding to a question in a German public radio interview about how long savers would have to wait for an end to the bank’s zero rates policy.

“I can’t say when a rate increase will come, but what I can say is that a hike in the current environment would have a devastating impact and nobody should want that,” she said.

Schnabel said one-off effects including the end of Germany’s VAT cut and a base effect from energy costs were likely to cause a rise in inflation later this year. But that should not be confused with a sustained rise in inflation, she added, not least because of the difficulties of measuring inflation during lockdowns, when purchasing habits were so different.

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