ECB’s Schnabel Warns Economic Shocks Are Not Over

The End of the “Great Moderation”

European Central Bank Executive Board member Isabel Schnabel has delivered a blunt assessment of the Eurozone economy: the era of low inflation and stable growth is over. Despite cooling headline inflation, Schnabel warns that the region has not returned to a pre-pandemic or pre-war state.

Structural Shocks Beyond Energy Prices

For policymakers, the economic fallout from the war in Ukraine and subsequent energy volatility cannot simply be ignored. The ECB’s position is clear: the economy is not reverting to the norms of the previous decade. Instead, it is adjusting to a new, higher-cost reality.

The Divide Between Investors and the ECB

The divergence is sharp:

A Restrictive Stance on Interest Rates

Schnabel’s commentary acts as a firm counterweight to market optimism.

Prioritizing Resilience Over Stimulus

Because a return to the "pre-war situation" is unlikely in the near term, the bank’s "data-dependent" approach remains the priority.

Summary of Economic Outlook

• Structural Change: The ECB argues that the Eurozone has moved into a new economic phase characterized by higher structural costs.
• Geopolitical Impact: Energy price volatility is viewed as a persistent risk rather than a transient event.