ECB should raise rates in June, even if Iran peace deal is struck, Schnabel says
Isabel Schnabel said prolonged energy shocks are feeding inflation and that markets expect a quarter-point move on June 11.
- On Tuesday, ECB Executive Board member Isabel Schnabel told Reuters the central bank should raise rates in June even if ongoing U.S.-Iran peace talks succeed, citing persistent energy shocks already spreading through the broader economy.
- Sharply higher energy prices have driven inflation to 3%, well above the ECB's 2% target, after the central bank held rates steady for a year and debated a hike last month as multiple policymakers signalled action was needed.
- Schnabel emphasized that even if the conflict ended immediately, substantial damage to energy infrastructure means monetary action remains necessary; she warned persistent shocks will depress growth while confidence indicators show sharp consumer declines.
- Financial markets have fully priced in two hikes to the ECB's 2% deposit rate and assign roughly 50% probability to a third within a year, though economists surveyed by Reuters are more conservative, forecasting two increases followed by a cut in mid-2027.
- Beyond June, Schnabel said the ECB should reassess its stance at each meeting rather than commit to a fixed path, as the European Commission last week projected just 0.9% euro zone growth for 2026, constraining aggressive tightening.
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ECB member I. Schnabel said in an interview that the ECB should raise interest rates in June, even if a peace agreement between the US and Iran is reached. According to her, there are already signs that the impact of higher energy prices is being passed on to other goods and services, which justifies raising interest rates at the next ECB meeting on June 11. According to I. Schnabel, the ECB should not commit to further action after that and sho…
Iran war, high oil and fuel prices, inflation: it is becoming more and more likely that the European Central Bank will raise interest rates, but the central bank is in a dilemma.
Financial agents have already fully predicted two increases in the ECB's 2% deposit rate and see a probability of approximately 50% of a third increase next year
The oil price shock as a result of the Iran war has alarmed the ECB's currency keepers. An increase in interest rates in June is becoming more and more likely.
ECB should hike rates regardless of Iran deal
The ECB should raise interest rates in June, even if ongoing peace talks with Iran yield a deal, as the conflict has been far longer than projected and high energy prices are spilling into the broader economy, board member Isabel Schnabel said.
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