ECB Board Member Calls for Further Interest Rate Hikes to Tackle Eurozone Inflation

European Central Bank board member Isabel Schnabel has emphasized that interest rates must rise further to tackle inflation in the eurozone. In an interview with Bloomberg News, Schnabel noted that the current policy rate is insufficient and that additional tightening is required to steer inflation back to target.

The main drivers of this stance are the ongoing conflict in the Middle East and the strong performance of the euro-zone economy, which pose upside risks to inflation. As a result, Schnabel signaled that at least one more interest rate hike may be necessary, even after a Middle East ceasefire and fall in oil prices.

This is in line with the European Commission's spring forecast, which shows inflation expected to reach 3.0% in 2026, up from the previous 1.9%, highlighting significant upside inflation risks. Schnabel had already signaled continued tightening would be needed even after a Middle East ceasefire and fall in oil prices, suggesting that current policy rates are insufficient.