Kazimir Sounds Alarm on Rising Gas Prices and Upside Inflation Risk

European Central Bank policymaker Peter Kazimir is shifting his focus from oil and fuel prices to gas and electricity prices, which he believes pose a significant upside risk to inflation. In a recent blog post, Kazimir noted that natural gas prices have reached a four-year high due to European nations' failure to fill gas storages over the summer, leading to surging heating and electricity costs.

Kazimir also pointed out that food price growth is unexpectedly low but will likely pick up in the coming months due to factors such as the European drought, El Nino weather phenomenon, and soaring diesel and fertiliser prices. He stressed that 'inflation risks are clearly tilted to the upside,' with the energy shock having already lasted longer than expected.

The ECB's next meeting is scheduled for October 29, and markets see a roughly 60% chance of a rate hike then, with some analysts expecting up to three more rate hikes in the coming year. Kazimir emphasized that the bank will be decisive when evidence warrants action, but stopped short of calling for higher rates.