ECB May Hike Rates Again in September Despite Improved Outlook

The European Central Bank (ECB) may still need to raise interest rates in September even if the economic outlook improves, according to Slovak central bank chief Peter Kazimir.

Kazimir, a vocal advocate for higher interest rates, stated that at least one more hike is necessary to combat inflation and that 'very convincing' data and geopolitical developments would be required to change his stance.

The ECB left its interest rate unchanged last week but hinted at a potential increase in September due to rising oil and gas prices caused by the conflict in the Middle East. Kazimir emphasized the importance of acting preemptively to prevent second-round price impacts, saying 'they often form quietly. By the time they are fully visible, they are costly to reverse.'

The financial markets currently expect at least two more rate hikes from the ECB, with the first move already priced in by October and the second by March. However, these expectations are highly volatile and influenced by oil prices, which have reached a point between the ECB's 'baseline' and 'milder' scenarios.