ECB's Schnabel Cites Inflation Expectations, Demand Outlook as Key Rate-Hike Factors

European Central Bank board member Isabel Schnabel said on September 30, 2026, that the ECB must weigh three factors — inflation expectations, demand resilience, and rising global borrowing costs — in deciding whether further interest rate hikes are needed. The ECB has raised rates twice this year after an energy price surge drove inflation well above its 2% target. Markets price up to four more moves over the next year. Schnabel, a policy hawk, said most longer-term inflation expectations remain near 2%, partly due to the ECB's own tightening. She said monetary policy can tolerate a more gradual return to target as long as expectations stay anchored. She also flagged that surging global borrowing costs, driven partly by rising US yields, could weigh on growth more than ECB models predict, easing medium-term inflation — but said strong credit dynamics suggest rates still do not restrict the economy.