"Initially, there was still the question: well maybe this is a short-lived event, but we unfortunately had to learn that this is much more persistent," she said. She added that the strain is broadening: "It's not just oil, it's also diesel, it's gas."
Because of the Middle East conflict, inflation has already exceeded the ECB's 2% goal. Some analysts, noting the economy is still resilient, expect inflation could hit 4% later this year. Schnabel said policymakers have already reacted: We raised interest rates twice.
By late 2027, market pricing points to four additional 25-basis-point ECB increases.
Irish central-bank chief Gabriel Makhlouf said he is "uncomfortable" with ECB projections showing price growth around 3%, and warned that policymakers would need to step in if rising energy costs start feeding into broader inflation. Bundesbank President Joachim Nagel said rates may need to go into "mild restrictive territory."
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For your wallet, the takeaway is simple: if energy stays pricey and inflation sticks around, borrowing may stay costlier and cash could keep losing a bit of bite. Watching signals like these helps you gauge how much rate sensitivity you want in your mix.
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