ECB Executive Director Schnabel clarifies that “interest rates should not be cut” ≠ “interest rates should be raised” and that interest rates will not be raised in the foreseeable future

The Zhitong Finance App learned that ECB Executive Committee member Isabelle Schnabel said that she does not expect interest rates to rise for some time. After Schnabel's recent remarks prompted investors to increase their bets that borrowing costs would rise next year, she clarified that she had not said that interest rates should be raised.

“Currently, there are no expectations of interest rate hikes in the foreseeable future,” she said in the “Frankfurt Report” podcast released on Monday. Unless unforeseen events occur, interest rates are likely to remain stable for quite some time.”

Schnabel's remarks came after the global market repriced tighter monetary policies.

At the beginning of December, she said she was “quite relieved” that investors were betting that the ECB's next interest rate move would be to raise interest rates. Schnabel said that although borrowing costs are already at an appropriate level “for some time” (unless there is a further impact), significant increases in consumer spending, corporate investment, and government spending on defense and infrastructure will support the economy. This remark triggered market adjustments.

Schnabel's confidence stems from Europe's good performance in dealing with tariff turmoil caused by US President Donald Trump. Consumers are benefiting from rapid wage growth and unemployment rates close to historic lows. At the same time, favorable financing conditions and a boom in competition for the adoption of artificial intelligence technology have boosted investment.

Officials have always hinted that they are satisfied with the current level of interest rates, which they consider the optimal level because inflation has returned to its 2% target, and the economies of the 20 Eurozone countries have continued to grow despite slow growth.

According to people familiar with the matter, policymakers privately believe that the interest rate cut cycle is probably over.

Schnabel stressed, “I'm not saying interest rates should be raised. Instead, interest rates should not be cut again. That's a very important difference.”

Last Thursday, the ECB announced that it will keep its main policy interest rate unchanged and expressed a more positive view on the Eurozone economic outlook, believing that the Eurozone economy has shown some resilience against the backdrop of global trade shocks and heightened geopolitical uncertainty.

In terms of monetary policy communication, ECB President Lagarde made it clear that in the current highly uncertain environment, the ECB is unable to provide forward-looking guidance. She pointed out that whether it is geopolitical risks, changes in the global trade pattern, or trade and production capacity issues near the European border, the future path is full of uncertainty, and the central bank can only stick to the “meeting one by one, data-dependent” decision-making method.

She said that the current interest rate resolution was passed unanimously, and the committee agreed that the current policy position is “in the right position,” but this does not mean that the policy path has been fixed. All policy options will remain in place, and future interest rate adjustments will not set a fixed path or schedule.