Isabel Schnabel's departure from the ECB: consequences for monetary policy

Isabel Schnabel's early departure from the European Central Bank (ECB) will have momentous consequences. It creates unexpected dynamics in the political realignment of the ECB leadership. And it is changing the statics among the euro defenders.

Schnabel sets the agenda as a strong supporter of a tight monetary policy. It is sometimes driving the other central bankers ahead of them with demands for interest rate increases. As the leader of the dominant “hawk” camp, she would rather raise interest rates briskly than considerately in case of doubt, so as not to let inflation get out of control again.

Schnabel consciously adopted her role. At the beginning of her term in office, which was shortened from eight to seven years, she publicly played down the surge in inflation. She corrected her mistake faster and more decisively than others. This admission has shaped Schnabel into a convinced hardliner.

Among economists, the old way of doing business is more respected than ever. Each of her speeches has substance. She wants to change things, even if she provokes: She received a rebuff from ECB boss Christine Lagarde for her proposal to introduce interest rate forecasts for all central bankers following the example of the US Federal Reserve.