Isabel Schnabel: Navigating Stormy Waters—Reflections on Monetary Policy

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In a speech at the ECB money market conference, Isabel Schnabel reviewed the inflation shocks of recent years and shared her thoughts on conducting monetary policy in an uncertain environment. She advocates avoiding overcommitment and preserving room for adjustment, while using key policy rates as the primary tool; asset purchases should distinguish between market stabilisation and calibrating the policy stance, and the TPI can be used to address disorderly market dynamics that threaten monetary policy transmission. She also noted that the policy response depends mainly on the impact of the shock on the expected inflation path, rather than on the nature of the shock itself.