FRANKFURT, April 24 (Reuters) - The European Central Bank needs to keep raising interest rates and a 50 basis point increase in May is not off the table as the peak in underlying inflation may not happen very soon, ECB board member Isabel Schnabel told Politico.
The ECB has raised rates at six successive meetings and policymakers are now split between an increase of 25 or 50 basis points in the bank's 3% deposit rate at the next policy meeting on May 4.
"It's clear that further rate hikes are needed, but the size of the rate hikes is going to depend on the incoming data," Politico quoted Schnabel on Monday as saying. "Data dependence means that 50 basis points are not off the table."
Schnabel said that underlying inflation, which filters out volatile food and energy prices, shows very strong momentum and it was not clear that it would peak "very soon".
But even a peak is not necessarily a trigger for the ECB because policymakers need to have confidence that core inflation was on a sustained downward path.
"We need to see a sustained decline in core inflation that gives us confidence that our measures are starting to work," Schnabel added.
Listing potential obstacles to such a reversal, Schnabel noted that the services sector is recovering quickly and wage growth is picking up.
Schnabel, the head of the ECB's market operations, also said that the recent turbulence in the bank sector is likely to lead to a further tightening in financing conditions and policymakers needed to factor this into their decisions.
