ECB Official: Eurozone Economic Resilience Exceeds Expectations, Rate Hikes Cannot Wait

Markets have largely priced in the ECB's expected 25-basis-point rate hike next month, which would lift the deposit facility rate to 2.5%. Investors also anticipate a further hike as early as December 2026. Schnabel stated that markets "appear to understand our reaction function quite accurately," though she offered no specific guidance on the ultimate magnitude of future hikes. Economic resilience exceeds expectations; upside risks emerge Schnabel’s hawkish stance is supported by a string of economic data stronger than anticipated. Data released Tuesday showed Germany’s second-quarter output growth revised upward, with overall eurozone quarterly growth reaching 0.4%—its fastest pace in over a year—following near-stagnation in Q1. Schnabel attributed this momentum to three key drivers: fiscal policy stimulus, accelerated defense spending, and the global artificial intelligence boom. "The economy continues to outperform expectations, and new data repeatedly exceed upside forecasts," she said. "Confidence indicators suggest growth is accelerating further; compared with the ECB staff’s June forecast, I see a slight upward tilt in growth risks." Inflation pressures broaden; energy threats remain significant On inflation, eurozone headline inflation accelerated to 2.9% in July. Schnabel expressed concern about the persistence of energy-related price pressures. She noted that non-oil energy pressures are becoming stickier, with the natural gas situation "particularly worrying"—current European gas storage levels are low, posing a tangible upside risk to inflation. "The longer the conflict lasts, the higher the risk—and intensity—of indirect and second-round effects, especially given the continued resilience of aggregate demand," she said.

Global Central Bank Updates: Japan May Have Intervened with ¥5 Trillion; ECB Warns Energy Shocks Could Trigger Rate Hikes

May 8 — Today, multiple central banks worldwide signaled important policy shifts. Serbia’s central bank held rates steady; Japan may have deployed ¥5.01 trillion in foreign exchange intervention; ECB officials warned that expanded energy shocks could necessitate rate hikes; and Indonesia’s central bank announced plans for large-scale currency stabilization interventions. Global monetary policy divergence is intensifying. Serbia: Policy rate unchanged at 5.75% Serbia’s central bank maintained its benchmark interest rate at 5.75%. Amid global inflationary pressures and geopolitical uncertainty, the bank opted to pause adjustments to assess the impact of prior tightening measures and external shocks. Japan: Possible ¥5.01 trillion FX intervention—the largest on record Based on data released by the Bank of Japan, authorities may have deployed up to ¥5.01 trillion (approximately $32 billion) in the latest round of yen-support operations. Yen-buying interventions involve the BOJ withdrawing yen from the market; the resulting funding gap serves as a proxy for estimating intervention size. This amount far exceeds prior market expectations and sets a new record for Japan’s single-day foreign exchange intervention. It follows the yen’s breach of the ¥160-per-dollar threshold, prompting coordinated action by Japan’s Ministry of Finance and the BOJ to curb excessive depreciation. The scale underscores authorities’ heightened alarm over yen weakness. ECB: Rate hikes may be needed if energy shocks widen ECB Executive Board member Isabel Schnabel warned that if Middle East conflict-induced energy shocks expand further, the ECB would need to raise rates to prevent inflation expectations from becoming unanchored. This statement contrasts with market expectations of imminent ECB rate cuts. Disruptions to energy supply chains and persistently high oil prices could force the ECB into a difficult trade-off between growth and inflation. ECB Governing Council member François Villeroy de Galhau emphasized that the next policy move should be data-driven—not calendar-driven.

ECB’s Schnabel Says Energy-Price Trends ‘Quite Concerning’

Sep 14, 2026

ECB Executive Board member Isabel Schnabel warned that concerning energy price trends, driven by reduced refining capacities and low gas storage, may necessitate further interest-rate hikes due to global LNG competition.

bloomberg

2026-05-28

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ECB’s Schnabel Says Energy-Price Trends ‘Quite Concerning’

ECB’s Schnabel Says Energy-Price Trends ‘Quite Concerning’

FAQ