Edition November 7, 2026

Isabel Schnabel: Navigating stormy waters: reflections on monetary policy

Isabel Schnabel says monetary policy should preserve room to manoeuvre and respond to shocks according to their effects on the inflation outlook, not their nature.

ECB staff quickly developed scenarios with varying assumptions about the energy shock’s indirect and second-round effects, and monetary policy responded promptly to the expected persistence of inflationary pressures. The speech says leverage, reliance on short-term funding and interconnectedness in core markets require stronger oversight and a more effective macroprudential framework. Under the ECB’s new operational framework, banks can request as much liquidity as they need each week through standard refinancing operations at a fixed rate and against a broad range of collateral.

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