Kazimir Warns of Higher Inflation Risks Amid Gas Price Surge

European Central Bank policymaker Peter Kazimir is shifting his focus to gas prices and inflation risk, citing that 'inflation risks are clearly tilted to the upside.'

Kazimir, Slovakia's central bank chief, made this statement in a blog post, where he emphasized that policymakers' open-minded approach should not be misinterpreted as hesitation. The ECB raised interest rates for the second time this year on Thursday and increased its inflation projections.

The development of natural gas and power prices is becoming a key concern for Kazimir, who noted that 'my attention is now focused less on oil and fuel prices, but increasingly on gas and electricity prices.'

Natural gas prices are at a four-year high due to European nations' hesitation to fill gas storages over the summer. With storage levels far below historic norms, they are now rushing to store gas, leading to surging prices that will likely push up heating and electricity costs and fuel inflation more broadly.

Kazimir also warned of food price growth, which is expected to pick up due to a perfect storm of factors, including a European drought, the El Nino weather phenomenon, and soaring diesel and fertilizer prices. The ECB's next meeting is scheduled for October 29, and financial markets see a roughly 60% chance of a rate hike then.