Why does ECB board member Isabel Schnabel argue that a June rate hike is necessary even if an Iran peace deal is reached?

Schnabel argues that a June rate hike is necessary because the conflict has lasted longer than projected, causing lasting damage to energy infrastructure and global supply chains; high energy prices are already spilling into the broader economy through second-round effects on other goods and services, and inflation has already hit 3% with further increases likely—making it impossible for the ECB to 'look through' the shock.

What evidence does Schnabel cite to support her view that inflationary pressures are becoming embedded in the eurozone economy?

Schnabel cites multiple survey-based indicators—including the ECB's Consumer Expectations Survey, PMI data, and the EU Commission's sentiment indicator—as showing 'increasing signs that the shock is spilling over to other parts of the consumption basket', suggesting second-round effects are already materialising and raising risks of a persistent inflation spiral.

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ECB should raise rates in June, even if Iran peace deal is struck, Schnabel says

May 25, 2026

ECB board member Isabel Schnabel recommends raising interest rates in June, citing persistent high energy prices and inflation risks stemming from damaged energy infrastructure, regardless of potential Iran peace deals.

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