The ECB could pause or continue to raise rates at its next monetary policy meeting, Executive Board member Isabel Schnabel said in a speech Thursday, with high levels of uncertainty over the pace of disinflation supporting a data-dependent, meeting-by-meeting approach. (MNI SOURCES: ECB Mulls September Hawkish Pause, August CPI Key)

“Should we judge that the policy stance is inconsistent with a timely return of inflation to our 2% target, a further increase in interest rates would be warranted,” she said. “By contrast, should our assessment of the transmission of monetary policy suggest that the pace of disinflation is proceeding as desired, we may afford to wait until our next meeting to gather more evidence on how the slowdown in aggregate demand will feed through to price and wage-setting over time.”

It is not possible to predict where the peak rate is going to be, Schnabel said, or for how long rates will have to be held at restrictive levels, she said.

“Ultimately, the incoming data may well prescribe holding rates at restrictive levels over a significant period of time. The degree of restrictiveness, in turn, will also depend on the evolution of inflation expectations, as what ultimately matters for consumption and investment is real, not nominal, interest rates.