Kazimir Warns of Upside Inflation Risk as Gas Prices Soar

European Central Bank policymaker Peter Kazimir has shifted his focus to gas prices and sees an upside inflation risk. This comes after the ECB raised interest rates for the second time this year and increased its inflation projections, fueling market bets for up to three more rate hikes in the coming year.

Kazimir, Slovakia's central bank chief, emphasized that policymakers remain open-minded about their next move but will be decisive when evidence warrants action. He pointed out that 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, countries are now rushing to store gas and prices are surging, likely pushing up heating and electricity costs and fueling inflation more broadly. Food price growth is unexpectedly low, but a perfect storm of factors, including a European drought and soaring diesel and fertilizer prices, will push up prices in the coming months.