Surprisingly hawkish comments from @Isabel_Schnabel. At the very least the timing looks a bit odd to me, ahead of tomorrow's inflation shocker, renewed growth concerns and EUR strength. But, there are some important caveats... (1/n)
.@Isabel_Schnabel says there is "no reason to adjust the monetary stance" and "less of a need to deviate from the capital key", which sounds less cautious than Philip Lane's "two stage" approach. (2/n)
But @Isabel_Schnabel also insists on the ECB's assumptions:
"as long as the baseline scenario remains intact"
"at the moment, the baseline continues to look plausible"
"but let’s wait for the ECB staff projections"
Well, the baseline scenario will soon be challenged. (3/n)
Less surprisingly, @Isabel_Schnabel sees the EUR appreciation as "a good sign" meaning that the FX pass-through should be smaller. This also reduces the pressure on the ECB to address currency strength. (4/n)
Finally, the ECB has not "yet" discussed an increase in the tiering multiplier, but this sounds like an option the ECB will consider eventually - a question of "when" not "if". (5/5)
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