(Bloomberg) -- Another European Central Bank hike in borrowing costs probably won’t happen in light of last week’s consumer-price data, according to Executive Board member Isabel Schnabel.  

“The most recent inflation number has made a further rate increase rather unlikely,” she said in an interview with Reuters that was transcribed on the ECB’s website. 

The typically hawkish ECB official spoke days after a report showed euro-area consumer-price growth slowed to 2.4%, far less than economists had anticipated. Investors are now fully pricing in an interest-rate cut in April, and Schnabel didn’t rule out such a move could transpire.

“We have to see what’s going to happen,” she said. “We have been surprised many times in both directions. So, we should be careful in making statements about something that is going to happen in six months’ time.”

Just a month ago, after October data also showed slowing price growth, Schnabel had cautioned that it’s too early to rule out another rate hike and compared the fight to bring inflation to the ECB’s 2% target with overcoming the last mile in a long-distance run. Now she sounded more confident that the backdrop is shifting.

“The November flash release was a very pleasant surprise,” Schnabel said. “Most importantly, underlying inflation, which has proven more stubborn, is now also falling more quickly than we had expected. This is quite remarkable. All in all, inflation developments have been encouraging.”

Money markets ramped up bets on faster and deeper interest-rate cuts, almost fully pricing a quarter-point drop by March and 150-basis-points of decreases by the end of next year. The odds of a move in the first quarter were almost zero three weeks ago, while late last month only three quarter-point cuts were priced next year.

Schnabel isn’t yet fully confident that prices have been tamed. Mirroring comments on Monday by Vice President Luis de Guindos, she cautioned that “we must not declare victory over inflation prematurely.”

“We continue to expect an uptick over the coming months,” Schnabel said. “There’s going to be a reversal of some fiscal measures and of some base effects, and we cannot exclude that there’s going to be a new price spike in energy or food.”

Bundesbank President Joachim Nagel has struck a similar tone, warning that geopolitical tensions could also stoke price pressures. 

Policymakers are expected to keep rates on hold for a second time when they meet on Dec. 13-14. They’ll also present new economic forecasts that will stretch out to 2026 for the first time. 

UBS economists led by Reinhard Cluse said in a note on Monday that the ECB will probably have to lower its outlook for growth and inflation in 2023 and 2024. 

The ECB is currently set to reinvest maturing bonds from the €1.7 trillion ($1.8 trillion) pandemic emergency portfolio until the end of 2024. Several officials have pushed to revisit that stance, however, as the economy overcomes lingering pandemic effects and bond reduction proceeds only slowly. 

A key feature of the so-called PEPP reinvestments is that they can be deployed flexibly across jurisdictions, acting as the first line of defense against gyrations on euro-area bond markets. 

“As President Lagarde mentioned, the Governing Council is going to discuss reinvestments under the PEPP in the not-too-distant future and I’ll leave it up to you to interpret what that means,” Schnabel said. 

She insisted that any decision wouldn’t be a “big deal.”

“It’s clear that discussion is going to come,” Schnabel said “It’s also clear that at some point we’re going to fully end PEPP reinvestments. The amounts involved are relatively small and markets are expecting this to happen.”

--With assistance from James Hirai.

(Updates with market reaction in seventh paragraph.)

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