The ECB says that "the last mile" in the fight against inflation is the most difficult

If existing risks materialize, further increases in interest rates could be necessary

MADRID, 6 Oct. (EUROPA PRESS) -

The recent evolution of inflation data is encouraging, despite the fact that the general level is still above the 2% target and the persistence of the underlying rate, which suggests that the final stage in the fight against inflation inflation "may be the most difficult," according to the German executive of the European Central Bank (ECB), Isabel Schnabel.

"Given the persistence of underlying inflation, that 'last mile' may well prove to be the most difficult," says Schnabel in an interview with the Croatian newspaper 'Jutarnji list', where he assures that, despite the fact that "the recent news about the inflation are encouraging", there is no room for complacency or prematurely declaring victory over inflation.

For the German, ECB rates are now at restrictive levels, which will contribute substantially to a timely return of inflation to the 2% target, although it warns that it is not possible to say whether the peak has been reached or for how long. It will be necessary to keep the rates at restrictive levels, as this will depend on the data.

"Currently, all of them are going in the right direction. But I still see upward risks for inflation," says the ECB executive, for whom it is positive that inflation is decreasing rapidly, although she recognizes that it is still well above the goal. of 2%, which should be reached "no later than 2025 to keep inflation expectations firmly anchored."

In this sense, he points out that the recent increase in oil prices serves as a reminder that it cannot be taken for granted that inflation will only go down from now on, since new supply 'shocks' derived from oil prices could occur. energy or food.

Likewise, for Schnabel there are risks such as a higher-than-expected rise in wages, potentially accompanied by lower-than-expected productivity growth, as long as companies do not absorb these higher costs into their margins. "If they materialize, at some point further interest rate increases may be necessary," she says.

Regarding the evolution of the euro economy, the German recognizes that, in recent months, most economic indicators point to a slowdown in growth momentum, suggesting a period of stagnation rather than a deep or prolonged recession. .

"While a technical recession cannot be excluded, there are no signs of a deep or prolonged slowdown," says Schnabel, referring to the resilience demonstrated by the labor market, which, on the other hand, translates into strong job growth. nominal wages.

"We see signs of a period of stagnation, but not of a deep or prolonged recession," he concludes.