Schnabel warns of lasting scars from high inflation
Isabel Schnabel says the post-pandemic inflation spike left scars on consumers. She noted that current policies are less expansive than they were in 2022.
The post-pandemic spike in inflation has left enduring scars on the behavior of companies and consumers, who are now adjusted to the reality that prices can escalate rapidly and remain at elevated levels. European Central Bank policymaker Isabel Schnabel addressed these concerns during an event in Frankfurt on Wednesday, stating that the recent period of high price growth has fundamentally altered economic perceptions.
Schnabel noted that the experience of the inflation spike has created a lasting awareness among market participants. This awareness includes the understanding that price stability is not guaranteed and that costs can settle at a higher baseline than previously anticipated.
These are certain scars from this high-inflation episode.
Despite these long-term effects, Schnabel highlighted that the current policy environment is less stimulative than it was in 2022. She also pointed out that energy supply dynamics could improve, noting that some capacity lost due to the war involving Iran might eventually return to the market, potentially easing some of the upward pressure on global prices.
