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Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Martin Arnold on 2 February 2024
7 February 2024
Now that inflation is fading, some say it was transitory after all. Can central banks claim much credit for bringing inflation down?
It’s a myth that the inflation trajectory would have been the same in the absence of monetary policy action. Monetary policy was and remains essential to bring inflation down. If you look around, you see signs of monetary policy transmission everywhere. Just look at the tightening of financing conditions and the sharp deceleration of bank lending. Look at the decline of housing investments or at weak construction activity. And importantly, look at the broadly anchored inflation expectations in the wake of the largest inflation shock we have experienced in decades. Then ask yourself whether what we are seeing would have happened in the absence of monetary policy action. It’s true, of course, that part of the decline in…