Schnabel Sees Need for Further ECB Rate Hikes Amid War-Driven Inflation

European Central Bank (ECB) board member Isabel Schnabel has called for further interest rate hikes to combat inflation. In an interview with Bloomberg News, Schnabel stated that the current policy rate is insufficient and that rates must rise to prevent inflation from exceeding its target.

Schnabel cited the ongoing conflict in the Middle East as a contributing factor to rising energy costs, which are likely to push consumer-price growth above 2% for an extended period. She emphasized that acting only when these cost increases feed into wages would leave policymakers behind the curve.

The ECB raised borrowing costs for the first time in nearly three years in June to mitigate the impact of war-fueled energy price hikes on the economy. Schnabel noted that markets appear to understand the ECB's reaction function, but did not specify how much further borrowing costs are likely to rise.