European Central Bank Executive Board member Isabel Schnabel has warned that interest rates may need to rise further, citing renewed inflation risks linked to the ongoing conflict in the Middle East and the resilience of the euro-zone economy.
Inflation Risks Remain Elevated
In an interview with Bloomberg News published on Wednesday, Schnabel said stronger-than-expected economic activity across the euro area could add to inflationary pressures.
Geopolitical tensions in the Middle East may also create additional upside risks for inflation, particularly if they affect energy prices and broader supply conditions.
Schnabel Sees Need for Further ECB Tightening
Schnabel argued that the ECB’s current policy rate may not be restrictive enough to bring inflation sustainably back toward the central bank’s target over the medium term.
As a result, she indicated that additional monetary policy tightening could be necessary to ensure inflation continues moving toward the ECB’s objective.
Her comments reinforce expectations that the European Central Bank may have to maintain a more restrictive policy stance if inflation pressures remain persistent.
