European Central Bank Executive Board member Isabel Schnabel stated that if the conflict involving Iran leads to more persistent inflationary effects, the ECB would need to raise interest rates.
The German official noted on Thursday that the proportion of companies planning price increases is "rising rapidly," supply chains are facing disruptions, and households are adjusting their expectations. She indicated that, given recent memories of the last inflation shock, the current crisis could be felt more quickly.
Speaking in London, Schnabel said, "If the energy price shock broadens, monetary policy will need to tighten to counter the risk of second-round effects threatening medium-term price stability." She added, "This risk has increased in recent weeks."
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