ECB's Schnabel says overlapping shocks are complicating inflation path

European Central Bank Executive Board member Isabel Schnabel said in Luxembourg on 30 September 2026 that the ECB has had to respond to a sequence of overlapping shocks, and that the key ECB interest rates have been raised by 50 basis points since June, taking the deposit facility rate from 2% to 2.5%.

Her message matters for anyone trading or investing through a retail account because the ECB is not treating the latest inflation move as a single, isolated event. Schnabel said the new energy shock hit while disinflation was still in motion, with services inflation still above 3% and unit labour costs still rising above their historical average.

She also said the ECB has tried to make its policy more transparent by laying out its reaction function, which she described as the inflation outlook and the risks around it, the dynamics of underlying inflation and the strength of monetary policy transmission. In her words, that framework guidance helps foster public trust and reduces uncertainty about how the Governing Council will react.

Schnabel said the ECB cannot simply look through an adverse supply shock if the effect is large or persistent enough to push projected inflation above target. She said what matters for policy is the effect on the projected path of inflation over the relevant horizon, not whether the shock is labelled supply or demand.

She added that the ECB is putting greater emphasis on underlying inflation measures because headline inflation can be distorted by energy swings and base effects. The September staff projections for the euro area see HICP inflation falling from 3.0% this year to 2.1% in 2028, while HICP inflation excluding energy and food is expected to rise to 2.6% in 2027 before easing to 2.3% in 2028.

Schnabel said the latest projections were already being tested by incoming data, including higher household inflation expectations, resilient consumption and a repricing of short- and long-term interest rates. She said the coming months will show how the economy responds to the rate increases already delivered and how much of the current pipeline price pressure feeds through to underlying inflation and expectations.