Schnabel Backs June ECB Rate Hike Despite Peace Talks
ECB board member Isabel Schnabel stated that the central bank should raise interest rates in June because high energy prices are already impacting the broader economy. She noted that even a potential peace deal with Iran would not undo the damage to infrastructure and global supply chains.
The European Central Bank (ECB) should raise interest rates in June, even if a potential peace deal between the United States and Iran is struck. ECB board member Isabel Schnabel told Reuters that persistent energy shocks have already damaged infrastructure and pushed inflation to 3%. For investors, this signals a shift toward hawkish policy despite weakening growth forecasts for the euro area.
### Why Energy Shocks Demand a Rate Hike The ECB has held rates steady for a year, but rising energy costs now threaten to trigger a broad inflation spiral. Schnabel noted that the current economic environment has surpassed previous adverse scenarios that assumed a rapid normalization of Brent Crude Oil prices.
