Isabel Schnabel, a board member of the European Central Bank (ECB), highlighted concerns about inflation outpacing the ECB's target due to global economic instability. With recent trends indicating possible cuts in lending rates, Schnabel expressed her belief that rates should remain unchanged to support the economy. While the financial markets anticipate rate cuts, she warned of potential inflationary pressures from increased government spending, particularly from Germany, amidst uncertainty in the eurozone's economic growth and external factors such as the US trade war.
Ms Schnabel said inflation was at risk of exceeding the ECB's 2pc target in the medium term, highlighting the turmoil in the global economy.
She wants to keep rates unchanged since they are already low enough not to hold back the European economy, stating 'Now is the time to keep a steady hand.'
Ms Schnabel warned that while short-term inflation might dip below the ECB's target, a surge in government spending could push costs up in the medium term.
Financial markets see a 90pc chance of a rate cut in June, contrary to Ms Schnabel's view that maintaining rates is the appropriate course of action.
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