Isabel Schnabel, one of the European Central Bank’s most hawkish voices, wants rates going up in June. And she doesn’t care what happens with Iran.
The ECB Executive Board member argued on May 26 that the central bank should raise its key interest rate at the upcoming June meeting, even if a US-Iran peace deal materializes in the interim. Her logic: the inflationary damage from persistently high energy prices is already baked in, and waiting around for geopolitical breakthroughs isn’t a monetary policy strategy.
The numbers behind the pivot
The ECB’s deposit facility rate currently sits at 2.00%, with the main refinancing rate at 2.15% and the marginal lending rate at 2.40%. Those levels reflect a period of sustained holds after multiple cuts throughout 2025. Schnabel’s comments suggest that era of accommodation is over.
Financial markets are already pricing in the shift. Expectations now point to the deposit facility rate climbing to somewhere between 2.75% and 3% by year’s end. That would mean three or more hikes over the next 12 months, a dramatic reversal from the easing cycle that dominated last year.
