ECB's Schnabel: Inflation Unlikely to Return to Target, Further Rate Hikes Needed
Nashnova编辑部
ECB Executive Board member Isabel Schnabel said on August 26 that current rates are not enough to bring inflation back to the 2% target, calling for further tightening; markets already price a 25-bp hike to 2.50% in September, but the governing council is split on whether to signal more.
What exactly did Schnabel say?
In a Bloomberg interview she stated plainly: "At the current level of policy rates, inflation is unlikely to return to target in the medium term — further tightening is necessary."
This means → the ECB's hawkish wing has now publicly endorsed continued hikes, moving beyond anonymous sourcing.
She flagged two upside risks to inflation: ongoing Middle East conflict driving energy prices higher, and stronger-than-expected eurozone growth — the economy has not buckled under prior hikes, giving hawks room to push further.
What will the September meeting deliver?
Reuters, citing three sources, reported that policymakers are ready to raise rates from 2.25% to 2.50% at the September 9–10 meeting.
The immediate trigger is energy-price inflation from the Iran conflict spilling into the broader economy.
In plain terms = the hike itself is near-certain. The real suspense is not "whether" but what the ECB says afterward.
Why does the ECB think it can keep hiking?
Eurozone inflation sits near 3%, well above the 2% target; natural-gas and gasoline prices remain conflict-elevated.
Output data and business surveys both show resilience — this means → prior hikes have not over-tightened the economy, and policymakers see room for more.
Put simply = if the economy were buckling, the ECB would hesitate. The data say "still holding up," so the hiking logic stands.
Then why no rush to offer forward guidance?
Sources noted that long-term inflation expectations remain anchored near the 2% target, giving policymakers little reason to flag more hikes at the September meeting.
This reflects a delicate internal balance — acknowledging stubborn near-term inflation while refusing to lock themselves into a prolonged hiking path.
Markets currently price one to two more hikes beyond September, but officials are in no hurry to validate that view.
What comes next?
Schnabel's remarks landed around the release of August inflation data, with language pointing directly at "the necessity of further tightening."
That sits in tension with the insider line of "no rush on forward guidance" — one hawk talks, the collective holds back.
This means → August inflation data is the key validation point before the September meeting: if the numbers back Schnabel's call, market pricing for further hikes will firm up.
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