Overview
- Isabel Schnabel, an ECB executive board member, said on Tuesday that the bank should raise interest rates at its June meeting because recent energy shocks have already pushed prices higher.
- Schnabel argued that a peace deal with Iran would not remove the need for a hike since damage to energy infrastructure and supply chains has created persistent inflationary pressure.
- Financial markets have moved to price in two rate increases and see about a 50% chance of a third, with expectations pushing the ECB deposit rate toward roughly 2.75%–3% by year‑end.
- She urged the ECB to reassess policy at every meeting rather than pre‑commit to a path, and said she would be ready to serve as ECB president if asked.
- Policymakers face a trade‑off between higher inflation risks and weak euro‑area growth, and higher euro‑zone rates could raise borrowing costs, strengthen the euro, and put pressure on mortgages, real estate and risk assets including crypto.