ECB More Worried About Inflation Being Too Low, Schnabel Says

The surprisingly high first estimates of German inflation in January were based on one-time effects, European Central Bank executive board member Isabel Schnabel said in an interview with Deutschlandfunk radio, referring to the expiration of the temporary value-added tax cut among other factors.

“It’s not easy to measure inflation right now because our basket of goods has changed significantly,” she said. “We have almost stopped consuming certain things altogether -– we’re no longer eating out, going to the hairdresser or traveling.”

These short-term developments shouldn’t be mistaken for a sustained increase in inflation, Schnabel said. The euro area faces very weak demand and it doesn’t look like this is going to fundamentally change.

“We continue to be more worried about inflation being too low rather than too high,” she added. “I can of course not predict when interest rates might be raised -- what I can tell you, though, is that raising interest rates in the current situation would have disastrous effects.”

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