European Central Bank's Schnabel: ECB Needs to Raise Rates Further to Tackle Inflation Risk

BlockBeats News, August 26th — European Central Bank (ECB) Executive Board Member Isabel Schnabel stated that due to the prolonged Middle East conflict and unexpectedly strong economic performance in the Eurozone, posing upside risks to inflation, interest rates must be further raised. The consumer price surge may exceed 2% for "a considerable period," and if action is taken only after this impact spreads to wages, policymakers will lag behind the situation. She said, "At the current interest rate, inflation is unlikely to return to the target level in the medium term, so it is necessary to further tighten policy."

Especially in the current environment where total demand remains robust, early prevention of second-round effects is crucial because acting too late may require more forceful tightening measures." She pointed out that fiscal policy, increased defense spending, and the global artificial intelligence boom are the main drivers of strong economic performance. Schnabel warned that energy price pressures, excluding oil, are becoming more persistent. Given the low levels of natural gas inventories in Europe, the trend in the natural gas market is particularly worrisome. "This poses substantial upside risks to inflation. The longer the conflict lasts, the higher the risks and intensity of indirect effects and second-round effects." (FXStreet)