ECB board member warns core inflation and gas prices remain elevated, leaving door open for further tightening despite market skepticism.
European Central Bank board member Isabel Schnabel signaled a July rate hike remains possible, citing persistent core inflation and gas prices still 40% above pre-war levels. Her remarks contrast with market expectations, which increasingly price out additional tightening after the July 22-23 meeting.
Schnabel highlighted refinery crack spreads at twice their pre-war levels and ongoing supply chain pressures, suggesting the ECB is not convinced by the recent oil price retreat. Fellow policymaker Pierre Wunsch’s more relaxed stance underscores divisions within the Governing Council over the energy backdrop’s impact.
Traders have scaled back bets on further tightening, with any further decline in oil or gas prices likely to strengthen the case for holding rates steady. Risks like a European heatwave and low Rhine water levels could still disrupt supply chains.