ECB Executive Board Member Isabel Schnabel discusses European economy and monetary policy

On June 19, 2026, Isabel Schnabel, Member of the Executive Board of the European Central Bank (ECB), was interviewed by Mark Schieritz and Kolja Rudzio. The discussion covered the implications of the ceasefire in the Middle East and falling oil prices for Europe and Germany.

Schnabel stated that the ceasefire is positive for the global economy, potentially providing renewed growth momentum. However, she emphasized that inflation remains a concern, driven primarily by high energy prices which have decreased but are still above pre-war levels. She noted that medium-term energy prices are unlikely to fall sharply due to uncertainties about the durability of peace, supply chain disruptions, infrastructure damage, and the need to replenish strategic reserves.

Schnabel explained that inflation is broadening beyond energy, affecting goods like diesel, jet fuel, and fertilizers, with potential second-round effects such as wage increases. She highlighted that current wage growth has not yet accelerated significantly, but inflation expectations could respond to recent price increases.

Regarding monetary policy, Schnabel justified the recent interest rate hike by the ECB, stating it was necessary to prevent second-round effects and keep inflation on target. She indicated that further rate increases are likely, depending on economic developments and inflation trends.

She clarified that raising interest rates reduces demand, which helps lower inflation, and that the modest rate increase so far has not yet been restrictive. Schnabel also addressed the impact of fiscal measures, such as government spending and subsidies, emphasizing that such measures should be temporary and targeted to avoid inflationary effects.

Schnabel discussed Germany’s economic reforms, including infrastructure investments and defense spending, noting the importance of effective implementation and structural reforms. She identified long-term challenges for Germany, such as demographic decline, competitiveness issues, and technological innovation, especially in artificial intelligence.

She outlined three priorities for Europe: innovation, integration, and sovereignty. These include improving framework conditions for research, reducing regulatory fragmentation, and reducing dependencies in critical sectors like energy and raw materials. Schnabel also highlighted the need for strategic autonomy in technology, especially given recent US restrictions on AI access.

Addressing concerns about high public debt, Schnabel stated that the sustainability of public finances depends on economic growth, which is limited by demographic trends. She reassured that Germany’s debt level is manageable but emphasized the importance of reforms to boost growth potential.