Schnabel says the ECB should keep raising interest rates despite the economic downturn

Schnabel says the ECB should keep raising interest rates despite the economic downturn

FRANKFURT (Reuters) – European Central Bank Governing Council member Isabelle Schnabel said the euro zone is facing an economic slowdown but inflation is still too high so interest rates should continue to rise.

“Looming deflation will have a dampening effect on inflation,” Schnabel told German news site T-Online in an interview. “However, the starting point for interest rates is very low, so obviously we need to keep raising rates.”

While Schnabel has not yet considered recession the primary case for the eurozone, she warned that it could be inevitable in Germany, the largest economy in the 19-nation bloc.

Market expectations are split between 50 and 75 basis points for an October rate hike. Schnabel did not hint at which way she was leaning, but said only that the European Central Bank will do whatever is needed to control inflation.

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