FRANKFURT, Jan. 8 (Reuters) – Soaring energy prices could cause the European Central Bank (ECB) to stop “watching” high inflation and start acting, especially if the ecological transition turns out to be inflationary, Isabel said on Saturday Schnabel, member of the institution’s board of governors.
The rise in consumer prices in the 19 countries using the single currency reached 5% year on year in December, a record level that is more than double the ECB’s 2% target.
The ECB believes, however, that this increase will slow down on its own as inflation is mainly fueled by transitory factors.
“The rise in energy prices could lead to a departure from a policy of” looking through “, said Isabel Schnabel, believing that a more persistent increase in energy prices could eventually force the ECB to act.
According to her, two scenarios could lead the ECB to review its monetary policy. The first is to determine whether high energy prices spill over into other sectors of the economy and change pricing behavior.
“But at the moment, there is no sign of bigger second round effects,” she said. “Wage growth and union demands remain relatively subdued,” she added.
The second scenario is to examine whether the trajectory of energy prices, strongly linked to carbon taxes and ecological transition, threatens to push headline inflation above the institution’s target. (Report Balazs Koranyi; French version Claude Chendjou, said by Matthieu Protard)