Statements from ECB Member Schnabel About Energy Prices and Interest Rate Increase

Speaking at the 2nd European Competitiveness Symposium organized by the German Ministry of Economy and Energy in Berlin, Schnabel stated that it is not yet clear whether the ECB's interest rate increase on September 10 will be sufficient.

"We will base our future decisions entirely on the new data that will enter the system." Schnabel described the recent price increases in the energy sector as "quite worrying".

Schnabel emphasized that this applies not only to oil, but also to processed products such as diesel and natural gas, which has already reached very high levels.

At its September meeting, the ECB increased the policy rate to 2.50 percent and revised most of its inflation forecasts upwards. These steps increased expectations for new interest rate increases in the markets.

Natural gas prices are at the highest level in the last 4 years

On the other hand, energy prices stand out as the main risk factor for the ECB. While oil prices crossed the 100 dollar mark again due to the conflict in the Middle East, annual inflation in the Eurozone rose to 3.3 percent in August, reaching its highest level in the last three years, due to the rapid increase in energy costs.

During this period, natural gas prices in Europe reached the highest level recorded since 2023 and began to hover at the highest level in the last 4 years.

The main factor in the rise in prices was the delay of European countries in filling gas tanks in the summer months, with the expectation that the conflict with Iran would be resolved and prices would fall.

Currently rushed procurement activities continue to put upward pressure on prices, as current storage levels remain well below the average of previous years. Following these developments, markets are pricing the probability of a new interest rate increase at the ECB's next meeting at the end of October at over 60 percent.