ECB's Schnabel: ECB will not adjust policy on this year's inflation spike

Early Tuesday morning in Asia, Isabel Schnabel, Member of the Executive Board of the European Central Bank (ECB), joined the chorus of global central bankers who defy reflation fears.

The ECB policymaker initially highlights expectations that German inflation could “exceed 3% this year,” before stating, “but the European Central Bank considers this a transient rise and will not adjust policy in response.”

With oil prices rebounding after their collapse a year ago, eurozone inflation is already close to the ECB's nearly 2% target but underlying price growth, a measure closely watched by the policymakers, remains below 1%, said Reuters piece.

FX implications

Following the news, EUR/USD licks its wounds around 1.2130 after dropping the most in a week, not to forget reversing from 10-week’s top. With most of the global central banks trying to ignore inflation pick-up this week’s US Consumer Price Index (CPI) becomes the key to watch.