ECB's Schnabel Highlights Key Factors Influencing Interest Rate Decisions

European Central Bank (ECB) board member Isabel Schnabel has identified three key factors that could influence the bank's decision to raise interest rates further. Speaking in Luxembourg, Schnabel noted that these factors include inflation expectations, demand resilience, and global borrowing costs.

Schnabel emphasized that as long as inflation expectations remain anchored at around 2%, monetary policy can tolerate a more gradual return of inflation to target. However, if sustained increases in energy prices were to influence inflation expectations, this could lead to a stronger case for further rate hikes.

She also highlighted the importance of demand resilience, stating that higher costs are passed on to consumers more easily when growth is holding up. Global borrowing costs have recently surged, driven in part by rising US yields, and Schnabel indicated that this could weigh on growth more than the central bank predicts.