European Central Bank executive board member: Inflation still has upside risks, ECB expected to further raise interest rates.

Golden Finance reported that on June 27, Isabel Schnabel, a member of the Executive Board of the European Central Bank, warned that even if a US-Iran peace agreement reopens the Strait of Hormuz, price pressures may be greater than expected.

Speaking at an event in Germany on Saturday, Schnabel said, “There are upside risks to inflation in food, goods, and services,” and added that “energy price shocks could further intensify broader inflation dynamics.” Schnabel welcomed the recent decline in energy prices driven by the outlook for a US-Iran peace agreement, but she also cautioned that this is not a reason to relax vigilance. She said, “Uncertainty remains very high, but the announced peace agreement reduces the likelihood of negative outcomes.”

However, as reopening the Strait of Hormuz still needs to proceed gradually, oil prices are expected to continue rising. Considered one of the most hawkish members in the Governing Council, Schnabel reiterated that “the ECB is expected to further raise interest rates to bring the inflation rate back to the 2% level over the medium term.” She said, “Consumer inflation expectations have risen, but there are currently no signs of wage increases.”