Schnabel Warns of Higher Interest Rates Amid Resilient Euro-Zone Economy

European Central Bank (ECB) Executive Board member Isabel Schnabel said interest rates must rise further due to a resilient euro-zone economy and the lengthy conflict in the Middle East. Consumer-price growth is likely to exceed 2% for an 'extended period' due to high energy costs, she warned.

'At the current policy rate, inflation is unlikely to return to target over the medium term, and therefore further tightening will be necessary,' Schnabel told Bloomberg on Tuesday. This is in line with investors who are almost fully pricing a quarter-point move, bringing the deposit rate to 2.5%.

The ECB's decision next month will determine whether more interest rate hikes are needed. Data released on Tuesday showed German output rising more strongly than initially estimated in the second quarter, and the euro area grew 0.4% in that period after stagnating in early 2026.