ECB's Schnabel says the central bank must act early to prevent second-round effects

European Central Bank Executive Board member Isabel Schnabel emphasized the critical need for early monetary policy action to curb persistent inflation and prevent second-round effects from feeding into wages and broader consumer prices. Speaking on the Eurozone economic outlook, Schnabel highlighted that inflation is projected to remain above the central bank's 2% target for an extended duration, necessitating proactive policy restraint to keep long-term inflation expectations firmly anchored. Schnabel pointed out that positive growth momentum across the Eurozone economy, combined with escalating energy costs—where European natural gas prices have surged more than 130% in 2026 to reach their highest levels since March—poses significant upside risks to price stability. The hawkish commentary reinforces market expectations of continued monetary tightening, with traders currently pricing in 40 basis points of additional rate hikes by year-end and assigning a 95% probability to a rate increase at the ECB's upcoming September meeting.