ECB Awaits Signals from Energy Prices and Global Borrowing Costs

European Central Bank (ECB) board member Isabel Schnabel emphasized the importance of studying domestic and global factors before deciding on further interest rate hikes. The ECB has already raised rates twice this year due to high energy prices pushing inflation above its 2% target.

The key factors that could influence the ECB's decision include whether a persistent rise in energy prices will affect inflation expectations, which have remained around 2% despite recent hikes. Schnabel noted that repeated episodes of high inflation can make prices more salient and prompt households to increase their price or wage expectations.

Another crucial factor is the overall demand in the economy, as higher costs are passed on to consumers more easily when growth is holding up. Schnabel also highlighted the impact of global borrowing costs, driven by rising US yields, which could weigh on growth more than predicted by the ECB.