ECB Executive Board member Isabel Schnabel reinforced her hawkish stance on Monday, arguing that policymakers can no longer treat the inflation impact of the Iran conflict as a temporary shock. Speaking at a conference in Seoul, Schnabel said, “We can no longer look through this shock,” warning that “the risk of de-anchoring inflation expectations is rising.” Her remarks further solidify expectations that the ECB will raise interest rates at its June 10-11 meeting.
Schnabel argued that the current energy shock differs from previous episodes because it is increasingly feeding through global supply chains and production costs rather than remaining confined to oil prices alone. She warned that rising producer-price pressures in China and elsewhere are beginning to create broader inflationary forces. “We are seeing globally that pipeline pressures are rising,” she said, adding that these pressures “will exert inflationary pressure basically all over the world.”
While supporting further tightening, Schnabel stopped short of providing guidance on how many additional rate hikes may follow. “It’s too early to say that it’s a certain number of hikes and then it’s done,” she said.
ECB Executive Board member Isabel Schnabel said policymakers can no longer "look through" the inflation shock from the Iran conflict, warning that inflation expectations risk becoming unanchored and reinforcing the case for a June rate hike.){kind=link}