Central Banks
Big ECB Asset Stock May Hurt Inflation Fight, Schnabel Says
- Balance sheet unwind will give the ECB space to act, she said
- Staff estimates show risk premia rose as runoff anticipated
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European Central Bank Executive Board member Isabel Schnabel said that large bond holdings accrued under quantitative easing risk complicating efforts to fight inflation.
The current size of the balance sheet is bigger than necessary to effectively implement the ECB’s monetary-policy stance, Schnabel said Thursday in a speech. Shrinking the portfolio would bring benefits that include allowing officials more space to act should interest rates be cut to the extremes seen last decade, she said.