Isabel Schnabel, a member of the European Central Bank's Executive Board, has called for an interest rate hike at the bank's June meeting, even if a peace deal with Iran is reached.
This marks a sharp turn for the ECB, which held rates steady through April. The main refinancing rate sits at 2.15%, the deposit facility at 2.0%. Schnabel's comments suggest inflation damage from the Iran conflict-which sent energy prices soaring and cost global companies an estimated $25 billion-is already baked in.
Another ECB policymaker, Martin Kocher, echoes Schnabel's view, building consensus for a rate increase at the June 10-11 Governing Council meeting. Markets now treat a June hike as virtually assured, with speculation the deposit rate could rise to between 2.75% and 3% over the next year.
For investors, higher rates mean tighter liquidity and pressure on risk assets like Bitcoin and Ethereum. Non-yielding assets become less attractive as risk-free euro rates approach 3%. Expect heightened volatility around the June meeting; forward guidance on future hikes will be critical for summer risk appetite.