ECB's Kazimir Warns of Euro Zone Inflation Risks Amid Rising Energy Prices

European Central Bank policymaker Peter Kazimir has expressed concerns over euro zone inflation, stating that risks are tilted to the upside. In a recent blog post, Kazimir noted that his attention has shifted from oil and fuel prices to natural gas and electricity prices, which have reached a four-year high.

The ECB lifted interest rates for the second time this year on Thursday and revised its inflation projections upward, strengthening market expectations for additional rate increases. Kazimir emphasized that an open-minded approach to the next policy move should not be interpreted as hesitation, and that the bank would act decisively when evidence justifies it.

Kazimir highlighted that food price growth has been unexpectedly low, but a combination of factors including a European drought, El Nino weather phenomenon, and rising diesel and fertilizer prices is expected to push prices up in the months ahead. He warned that the energy shock has persisted longer than anticipated and its full consequences have yet to work through the economy.

The ECB is scheduled to meet next on October 29, with financial markets assigning a roughly 60% probability of a rate hike at that meeting. A move by the end of the year is fully priced in.