Why does ECB's Isabel Schnabel believe further interest rate hikes are necessary despite recent progress in US-Iran peace talks?

Schnabel states that 'from today’s perspective, we will need to continue raising interest rates in order to bring inflation back to our target of 2% in the medium term,' emphasizing that the ceasefire is 'no reason for monetary policy to let its guard down.' She explains that although energy prices have fallen, they remain 'significantly higher than they were before the war,' especially for future deliveries over the next few years, and that the May inflation data already shows the energy shock has spread—raising the probability of second-round effects. She also notes current rates are still not restrictive enough.

What does Schnabel say about the euro-area economy’s resilience amid the energy-price shock?

Schnabel stresses that 'the economy is relatively resilient despite the major energy-price shock' and cites ECB projections indicating 'the loss of growth is not as severe as one might have expected.'

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ECB's Schnabel Sees Need for Further Rate Hikes to Meet 2% Target

Jun 24, 2026

ECB Executive Board member Isabel Schnabel indicated further interest rate hikes may be needed to curb inflation driven by elevated energy prices, despite recent oil market declines. Officials remain cautious about persistent price growth risks over the medium term.

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