WASHINGTON, April 16 - The European Central Bank moved into the current episode of inflationary pressure in a comparatively robust condition, ECB board member Isabel Schnabel said on Thursday. Speaking at a Peterson Institute lecture, Schnabel argued that the euro area has spent the past decade addressing a range of economic and financial imbalances that have left the region better prepared.
According to Schnabel, three developments are central to that improved position. First, the economy has become more resilient. Second, past imbalances have largely dissipated. Third, sovereign spreads have narrowed. Together, she said, these shifts enabled the ECB to manage the last bout of inflation with only a modest drag on growth.
"It’s really remarkable that this was possible without causing a recession or financial instability, and this is quite important also in the presence of the most recent shock, because this puts us in a relatively good starting position to deal with this shock," Schnabel said during her remarks.
Her assessment frames the current inflationary episode as one that the central bank can confront from a stronger baseline than in earlier crises. Schnabel emphasized the practical importance of that baseline: the capacity to respond to shocks without precipitating recessionary conditions or financial instability.
The implication of her comments is primarily about policy flexibility. A more resilient economy and narrower sovereign spreads reduce some of the constraints that can limit a central bank’s ability to act, Schnabel suggested, and the limited growth impact from the prior inflationary episode serves as evidence that those structural improvements can matter in practice.
Her comments did not introduce new policy commitments or forecasts. Rather, they assessed the institutional and macroeconomic context the ECB faces as it addresses current inflationary pressures. Schnabel framed the earlier episode as a test that was passed with only a modest effect on growth, and she presented that outcome as a favorable precedent for handling the present shock.
Contextual note: Schnabel made these remarks at a Peterson Institute lecture; she referenced the recent and prior inflation shocks and the euro area’s evolution over the past decade as the basis for her assessment.