Home · Business · Sep 30 archive
ECB’s Schnabel says yield surge could cool inflation pressures
Confirmed
In Short: ECB Governing Council member Isabel Schnabel says high global yields could cool inflation pressures, allowing a more gradual return to target.
ECB Governing Council member Isabel Schnabel said that the recent surge in global yields could help cool inflation pressures, potentially allowing the central bank to take a more gradual approach to returning inflation to its target.
Schnabel noted that a resilient economy allows businesses to pass higher costs to consumers more quickly, which can keep inflation pressures in play.
However, she added that if the economy responds more to the recent spike in global yields than expected, it could slow economic activity more than anticipated, thereby easing price pressures.
The ECB's primary mandate is to maintain price stability, which means keeping inflation at around 2%. Schnabel suggested that if inflation expectations remain anchored, the central bank can adopt a more measured approach.
Schnabel's comments come as global financial markets are experiencing significant volatility. The Nasdaq gained 1.8% on AI stocks while the Dow dropped 4.3% as Treasury yields surged, signaling a shift in market sentiment.
Analysts at UBS noted that diverging central bank policies favor certain hedge fund strategies, such as equity market neutral, discretionary macro, and fixed income relative value funds, citing low stock correlation and an uneven yield curve.
Morgan Stanley's Amy Gower also highlighted that central bank and Chinese demand, debt worries, and a possible oil-led easing in inflation expectations support gold, favoring it over the next 12 months and calling $4,000 an ounce a strong floor.
What this adds
Schnabel's comments reflect a mixed message from the ECB, indicating both the potential for inflation cooling and the need for a cautious approach to economic recovery.
What's confirmed
- ECB Governing Council member Isabel Schnabel said that the recent surge in global yields could help cool inflation pressures, potentially allowing the central bank to take a more gradual approach to returning inflation to its target.
- Schnabel noted that a resilient economy allows businesses to pass higher costs to consumers more quickly, which can keep inflation pressures in play.
- However, she added that if the economy responds more to the recent spike in global yields than expected, it could slow economic activity more than anticipated, thereby easing price pressures.
- The ECB's primary mandate is to maintain price stability, which means keeping inflation at around 2%. Schnabel suggested that if inflation expectations remain anchored, the central bank can adopt a more measured approach.
- Schnabel's comments come as global financial markets are experiencing significant volatility. The Nasdaq gained 1.8% on AI stocks while the Dow dropped 4.3% as Treasury yields surged, signaling a shift in market sentiment.
- Analysts at UBS noted that diverging central bank policies favor certain hedge fund strategies, such as equity market neutral, discretionary macro, and fixed income relative value funds, citing low stock correlation and an uneven yield curve.
- Morgan Stanley's Amy Gower also highlighted that central bank and Chinese demand, debt worries, and a possible oil-led easing in inflation expectations support gold, favoring it over the next 12 months and calling $4,000 an ounce a strong floor.
What's still developing
- High costs passed through to consumers more quickly when economy resilient Robust credit dynamics suggest that financial conditions are not yet restrictive Possible economy responds more to the recent global yield rise than assumed; would dampen price pressures Can return inflation to target more gradually when expectations anchored The table below shows the percentage change of Euro (EUR) against listed major currencies this month.
- It is undertaken after QE when an economic recovery is underway and inflation starts rising.
- Comments from the ECB’s Schnabel cross the wires: Analysis: The message is mixed.
- Westons close in on £7bn Boots deal, betting on retail recovery despite high street pressures.
- Long-end yields climb as core inflation cools to 3.0%, sending Dow and S&P lower while Nasdaq gains.
- Traders have moved the next Federal Reserve hike from October 28 to December 9, and the inflation report that added to the move said more about July than August.