European Central Bank's Schnabel states there is no need to rush to respond to the Iran war

LootboxPhobia · 2026-03-28T00:54:46+00:00

European Central Bank member Schnabel stated that caution should be exercised in responding to the economic impact of the Iran war and that hasty reactions should be avoided. Although rising energy prices have triggered inflation expectations to increase, she emphasized the need for flexible responses to keep inflation stable at 2%. President Lagarde said she would not act without sufficient information.

LootboxPhobia

2026-03-28 00:54:46

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Investing.com – European Central Bank Executive Board member Isabel Schnabel said on Friday that the ECB should avoid a hasty response to the Iran war and maintain a cautious approach to policy decisions.

Schnabel acknowledged in a speech in Zurich that Europe is facing a massive energy price shock, which has triggered a sharp rise in investor inflation expectations. Nonetheless, she emphasized that the ECB must carefully weigh its decisions.

“We must remain flexible, we must remain vigilant, but there is no need to rush into action,” Schnabel said during her first public comments following last week’s decision to keep borrowing costs stable.

The German official, considered the most hawkish rate-setter at the ECB, stated that the central bank has time to review data and analyze developments, including evidence of second-round effects, demand conditions, and whether inflation shocks are becoming entrenched in inflation expectations and wage growth.

Her comments reflect a broader assessment by the ECB on how to respond to the economic impacts of the Middle East conflict. President Christine Lagarde stated this week that officials would not take action without sufficient information, although Bundesbank President Joachim Nagel and others hinted that a rate hike may need to be considered as early as April.

Schnabel remarked that the ECB will take all necessary measures to ensure inflation remains stable at 2%.

The surge in energy costs due to the war recalls the inflation shock following Russia’s invasion of Ukraine in 2022, and the economy is already experiencing the corresponding consequences.

Belgian central bank governor Pierre Wunsch said on Bloomberg TV on Friday that action might be needed if the conflict continues beyond June. While he called for patience, he indicated that measures might be taken next month if necessary.

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