FRANKFURT: European Central Bank (ECB) policymaker Isabel Schnabel said it is “necessary and proportionate” that inflation overshoots the institution’s goal for a while as the economy recovers, remarks that may spark a pushback by some colleagues in the governing council.

       The executive board member said that she sees “growing evidence” inflation expectations are finally starting to align with the ECB’s target of just-under 2%, but that continued monetary and fiscal stimulus is needed to ensure that happens.

       “Years of repeated over-prediction of the future path of inflation require that higher inflation prospects need to visibly migrate into the baseline scenario, and be reflected in actual underlying inflation dynamics,” she said.

       “Such patience may lead to inflation outcomes being moderately above our aim for a temporary period of time. This will be a necessary and proportionate requirement to set the conditions to escape low inflation.”

       The comments come as the ECB prepares for a special meeting this week to debate changing its price-stability strategy.

       While some on the 25-member council favour something akin to average inflation targeting – which would allow an overshoot after periods of low price growth, and which the US Federal Reserve has introduced – others have steered against it.

       Bundesbank president Jens Weidmann said recently that maintaining stimulus when price growth is above target could undermine the ECB’s credibility.

       Dutch central bank Governor Klaas Knot said in an interview published earlier on Saturday that policymakers may be underestimating the potential for accelerating inflation to become entrenched, and that the ECB’s 1.85-trillion-euro (US$2.2 trillion or RM9.15 trillion) pandemic bond-buying programme should end around March 2022 as scheduled.

       “We should not overestimate our capacity to determine in advance what is temporary inflation and what is not,” he told Dutch newspaper NRC. “There are other scenarios conceivable than our base case of persistently low inflation. Inflation is not dead.” — Bloomberg