Isabel Schnabel, a member of the European Central Bank board (ECB), has issued a warning. She cautions against making further interest rate cuts due to inflation risks.
The ECB has maintained its record high interest rates for the fifth consecutive meeting. But, there are expectations of a cut to the rates at the upcoming meeting.
Isabel Schnabel expressed uncertainty about the path taken post-June, emphasizing that the final stage of disinflation is the most challenging. She emphasized the potential risks of premature easing. Furthermore, she believed that a rate cut in July may not be necessary.
The ECB’s inflation target is set at 2%, but the financial markets are facing a high level of uncertainty right now, as there are predictions of around three interest rate reductions. The review indicated an improvement in financial stability conditions.
The risks of a severe recession and increased unemployment appear much lower.
