“Given the inflation outlook, I think we can gradually move toward neutral if the incoming data continue to confirm our baseline,” Schnabel said in her Frankfurt office. “I would warn against moving too far, that is into accommodative territory.”
The European Central Bank (ECB) needs to be wary of cutting interest rates too far as borrowing cost are already near a level that no longer restrains the economy and going lower could backfire, according to Executive Board member Isabel Schnabel.
Officials can continue to loosen monetary policy, but should do so only gradually to avoid taking rates below the so-called neutral threshold, Schnabel said in an interview. Easing too much could squander valuable policy space, the hawkish policymaker warned.
