Overview
- Isabel Schnabel told Bloomberg on Wednesday that higher interest rates are unavoidable to prevent wage-price and cost feedback loops that could entrench inflation.
- Euro-area inflation stood at 2.9 percent in July while the ECB’s main policy rate is 2.25 percent, a gap Schnabel said makes further tightening likely.
- Schnabel highlighted rising natural gas and energy costs tied to the Iran conflict and low European storage as substantial upside risks to inflation.
- Three people cited by Reuters told media some ECB officials would be prepared to lift the main rate by 25 basis points to 2.50 percent at the 10 September meeting, a report the ECB declined to confirm.
- The bank’s 2.0 percent medium-term inflation goal, June’s first rate increase in almost three years, and the likely effect of higher borrowing costs on households and firms frame the choice facing policymakers in Berlin on 10 September.