A European Central Bank policymaker has signalled that interest rates must rise further to ensure inflation returns to target, citing persistent upside risks from a resilient eurozone economy and geopolitical tensions.
Isabel Schnabel, an ECB Executive Board member, told Bloomberg in an interview published on Wednesday that the current policy stance is unlikely to achieve the bank’s medium-term inflation objective. "At the current policy rate, inflation is unlikely to return to target over the medium term," she said. "Therefore, further tightening will be necessary."
Schnabel’s remarks underscore concerns that inflation pressures remain elevated despite prior monetary tightening. The eurozone economy has shown unexpected strength, while supply chain disruptions linked to the Middle East conflict continue to pose risks to price stability. The ECB has raised rates aggressively in recent years to combat inflation, which peaked above 10% in 2022 but has since eased to around 2.5% in mid-2026.
The central bank’s next policy meeting is scheduled for September 11, where further guidance on the rate path is widely anticipated. Markets are pricing in a 25-basis-point increase, though Schnabel’s comments suggest the possibility of a more hawkish stance if inflation fails to moderate as expected.
