Isabel Schnabel: Reflation, not stagflation

Speech by Ms Isabel Schnabel, Member of the Executive Board of the European Central Bank, at a virtual event organised by Goldman Sachs, Frankfurt am Main, 17 November 2021.

The views expressed in this speech are those of the speaker and not the view of the BIS.

The recovery from the pandemic has been exceptional on many accounts.

In the euro area, it has been faster and stronger than any recovery since the Second World War. It has also been bumpier than most previous recoveries, with recurring phases of accelerating and decelerating growth. And it has been characterised by an unusually distinct mismatch between supply and demand, causing the prices of many products, including energy, to rise measurably.

With the recovery now in a more advanced stage, and with growth momentum moderating, some observers see current developments as raising the spectre of stagflation, reminiscent of the 1970s when a surge in oil prices stifled growth and pushed inflation levels up into double digits across most oil-importing economies.