ECB in 'relatively favorable' policy position, Schnabel says

By Leika Kihara

WASHINGTON, ‌April 15 (Reuters) - The ​European ​Central Bank is in a "relatively favorable" position on monetary policy after having successfully brought down ‌inflation to 2% before the war in the ⁠Middle East started, ECB board member Isabel Schnabel said on Wednesday.

"We ‌have a monetary policy ‌stance that is broadly neutral and this means we can afford to take the time that is ​needed to analyze the character of this shock. We do not need to rush into action," she ⁠said during a panel at the Institute of International Finance in Washington.

The current ​energy shock is particularly problematic because it has occurred after a very long period of ​above-target inflation, keeping memories of ‌high inflation very fresh in the public's mind and inflation expectations more fragile, she said.

As ⁠a net energy importer, however, the euro zone economy may weaken from rising fuel prices, making it harder for ⁠firms to pass through costs or for workers to negotiate higher ​pay, Schnabel added.

"We have to weigh our policy decisions very carefully and see which ... prevails. We have to stay data-dependent. We have ‌to think very carefully which data can give us information that inflation could become ‌entrenched, and there could be second-round effects," she said.

But ⁠the ECB must also ‌avoid imposing an "unnecessary ​cost" on the economy through premature monetary tightening, she said.

(Reporting by Leika Kihara; Editing by Paul ‌Simao)

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