MNI BRIEF: Inflation Risks Mean ECB May Hike Again - Schnabel

The ECB may need to hike rates again, Executive Board member Isabel Schnabel said in an interview published Friday, citing rising oil prices as evidence that inflation can still increase despite recent “encouraging” news.

Schnabel, who spoke to the paper on September 29, before the recent reversal in crude prices, said policymakers cannot afford to be “complacent,” or “declare victory over inflation prematurely” she said, making it impossible to say whether interest rates have reached a peak or for how long they will need to be kept at restrictive levels.

“I still see upside risks to inflation,” Schnabel said. “There could be new supply side shocks. Moreover, wages could grow more strongly than expected, potentially accompanied by lower-than-expected productivity growth, while firms might not absorb those higher costs through their profit margins. Such risks need to be monitored carefully. If they materialised, further interest rate hikes could be necessary at some point,” she added.