European Central Bank’s Schnabel argues dual mandates rarely change policy and urges vigilance on inflation amid supply shocks and AI

In a speech at the 2026 US Monetary Policy Forum, European Central Bank Executive Board member Isabel Schnabel defended the ECB’s price stability-first mandate amid calls to shift focus towards growth or adopt a dual mandate. She argued that, in practice, single and dual mandates often lead to similar monetary policy prescriptions, and that preserving a credible commitment to price stability becomes the central constraint when economies face more frequent supply-side shocks. Schnabel pointed to the pandemic as evidence that tight labour markets can amplify second-round effects from supply shocks through wage drift and faster price pass-through, raising the risk that attempts to “run the economy hot” ultimately force sharper tightening. With euro area inflation projected to be at 2% over the medium term, she highlighted heightened near-term uncertainty from the recent energy price spike linked to tensions in Iran and described tight labour markets, elevated compensation growth and expansionary fiscal policy as potential sources of renewed domestic inflation pressures, particularly in services. On artificial intelligence, she said productivity gains could expand supply and lift the equilibrium real interest rate, effectively easing the stance if policy rates are unchanged, but cautioned that euro area productivity remains subdued, the timing of AI’s effects is uncertain and near-term AI investment could be inflationary; she therefore argued for a data-driven approach and close monitoring of energy-shock persistence, inflation expectations and firms’ pass-through behaviour.