Schnabel warns inflation from Iran conflict is spreading beyond energy, requiring policy action to prevent unanchored expectations.
The European Central Bank can no longer dismiss inflation driven by the Iran war as temporary, a top official said, citing broader price pressures beyond energy. Isabel Schnabel noted that damage to infrastructure and supply chains has created lasting inflationary effects, even if the conflict ends soon.
Schnabel contrasted the current shock with past energy crises, describing it as a global demand shock that raises production costs. While she did not specify the number of rate hikes, she indicated the ECB will assess incoming data and Middle East developments before determining a peak.
The remarks suggest the ECB may extend its tightening cycle, though the exact path remains data-dependent. Markets are pricing in further hikes as inflation risks persist.