Eurozone inflation risks persist as Schnabel highlights wage pressures and energy costs, supporting market bets on a 40 bps rate hike by year-end.
European Central Bank Executive Board member Isabel Schnabel emphasized the need for early action to prevent inflation from becoming entrenched, citing persistent price pressures and second-round effects. She warned that inflation is likely to remain above the ECB’s 2% target for an extended period, potentially feeding into wages and broader inflation dynamics.
Schnabel noted that the Eurozone economy is gaining momentum, which could sustain higher inflation without policy restraint. She also flagged rising natural gas prices, which surged over 130% in 2026, as a key risk. Markets are pricing in a 40 bps tightening by year-end, with a 95% probability of a rate hike at the September meeting.
Her remarks align with her hawkish stance, reinforcing expectations for further monetary tightening. The focus remains on anchoring inflation expectations amid elevated energy costs and economic resilience.