Schnabel Sounds Alarm on Eurozone Inflation as Gas Prices Soar

Isabel Schnabel, an ECB Executive Board member, emphasized the need for early action to prevent inflation from becoming entrenched in the Eurozone. She warned that second-round effects remain a key risk as price pressures persist across the region.

Inflation is likely to remain above the ECB's 2% target for an extended period, which could eventually feed through into wages and broader inflation. To keep inflation expectations firmly anchored, Schnabel stressed the importance of controlling price growth now rather than later.

She noted that financial markets appear to understand the ECB's reaction function well, but the extent of policy tightening will depend on incoming economic data. The Eurozone economy appears to be gaining further momentum, which could keep inflation higher for longer without some policy restraint.

Schnabel also expressed concern about the natural gas situation, with prices recently rising to their highest levels since March. European natural gas prices have risen more than 130% in 2026, posing a risk to the ECB's 2% target.