Key facts
- ECB policymaker Peter Kazimir sees inflation risks tilted to the upside.
- Kazimir's focus is increasingly on gas and electricity prices, with food inflation also expected to rise.
- Natural gas prices are at a four-year high, with European nations rushing to fill storage.
- The ECB raised its key interest rate to 2.5% on Thursday, September 14.
- Financial markets see a roughly 60% chance of another rate hike by the ECB in October.
European Central Bank policymaker Peter Kazimir said on Monday that inflation risks are clearly tilted to the upside, with the development of natural gas and electricity prices becoming a key concern. He noted that food inflation is also expected to pick up.
Kazimir, an outspoken policy hawk and Slovakia's central bank chief, stated that while the ECB raised interest rates for the second time this year on Thursday, policymakers' open mind to the next move should not be taken for hesitation. He indicated that the bank will be decisive when evidence warrants action.
Natural gas prices are at a four-year high as European nations rush to fill gas storages, likely pushing up heating and electricity costs and fuelling inflation more broadly. Food price growth is unexpectedly low but a combination of factors, including a European drought, the El Nino weather phenomenon, and soaring diesel and fertilizer prices, are expected to push up prices in the coming months.
Kazimir said the energy shock has already lasted longer than many expected, yet its full consequences have not yet passed through to the economy. The ECB will next meet on October 29, and financial markets see a roughly 60% chance of a rate hike then, with a move by the end of the year fully priced in.