ECB’s Schnabel: Future Rate Hikes Not Ruled Out

6 October 2023

By Isabel Teles – FRANKFURT (Econostream) – European Central Bank Executive Board member Isabel Schnabel on Friday said that further ECB interest rates hikes could be necessary.

In an interview with Croatian daily Jutarnji list, Schnabel said that she still saw upside risks to inflation, including supply side shocks, stronger wages, low productivity growth and higher costs to firms, despite all the indicators having been ‘moving in the right direction.’

‘Such risks need to be monitored carefully', she said. 'If they materialised, further interest rate hikes could be necessary at some point.'

'[W]e must not be complacent, and we should not declare victory over inflation prematurely', she said.

‘The recent rise in oil prices is telling us that we cannot take it for granted that inflation will only move downwards from now on’, she said, ‘because we could have new supply side shocks stemming, for instance, from energy or food prices.’

She minimised the likelihood of an intense or extended recession. ‘While a technical recession cannot be excluded, there are no indications of a deep or prolonged downturn’, she said.

‘We see indications that this [weakening of the economy] is happening’, she said. ‘How this will play out over time will be one factor determining how persistent inflation, particularly underlying inflation, will be going forward.’