ECB’s Schnabel backs rate rises as inflation risks persist

European Central Bank Executive Board member Isabel Schnabel defended recent interest-rate rises in a speech in Luxembourg on 30 September, arguing that supply shocks can call for higher rates if they threaten to keep inflation above target. The ECB has raised its key rates by a total of 50 basis points since June, taking the deposit facility rate from 2% to 2.5%, she said. Her speech did not announce a further rate change. [1]

Schnabel cited September ECB staff forecasts showing headline inflation easing from 3.0% in 2026 to 2.1% in 2028. Inflation excluding energy and food is forecast at 2.6% in 2027 and 2.3% in 2028. She said oil and gas prices had moved closer to the forecasts’ adverse scenario since the projections were prepared, increasing the risk that inflation would remain above the ECB’s 2% target for longer. [1]

In Schnabel’s view, interest rates cannot remove a supply disruption but can respond to its expected effect on inflation. She said rising import and producer prices suggested higher costs were moving through supply chains, although that pressure was not yet visible in core inflation. [1]