JACKSON HOLE, Wyo. (Reuters) – The European Central Bank needs to act forcefully to combat inflation and preserve the public’s trust, which now appears to be waning, ECB board member Isabel Schnabel said on Saturday.
“Both the likelihood and the cost of current high inflation becoming entrenched in expectations are uncomfortably high,” she told the U.S. Federal Reserve’s Jackson Hole Economic Symposium. “In this environment, central banks need to act forcefully.”
She argued that the risk is rising that longer-term inflation expectations move above the bank’s target, or “de-anchor,” and surveys now suggest that inflation is denting public trust in central banks.
“If a central bank underestimates the persistence of inflation – as most of us have done over the past one-and-a-half years – and if it is slow to adapt its policies as a result, the costs may be substantial,” she said.
(Reporting by Balazs Koranyi; Editing by Bill Berkrot)