European Central Bank Executive Board member Isabel Schnabel acknowledged on Thursday that sticky services inflation in the Eurozone is keeping headline inflation at an elevated level. She also noted that price pressures in the services sector are broad-based and global and the pass-through of higher wages to producer prices in the services sector is stronger. "Momentum in services remains high and above levels consistent with price stability," Schnabel warned.
The official, however, noted that the wage growth in the region is expected to slow down as past price shocks unwind, adding that firms expect selling price increases to moderate as profit margins buffer higher wages.
The ECB's Executive Board member also said that private sector forecasts suggest that conditions for a soft landing in the euro area remain in place, but cautioned that inflation perceptions remain high, making expectations more fragile to new shocks.
In addition, Schnabel noted signs that the transmission of monetary policy tightening is weakening.