ECB May need to hike rates as inflation risks rise, Dolenc says

The European Central Bank may need to raise rates further as inflation risks remain high, ECB policymaker Primoz Dolenc said on Friday, noting the deposit rate has already been lifted to 2.5% this year. The bank’s latest data shows inflation has jumped to nearly twice its 2% target, prompting policymakers to assess how much more tightening is required to keep energy cost surges from embedding in the economy.

Dolenc highlighted that the composition of inflation data suggests only a limited pass‑through of high energy costs to other goods and services, and that core inflation has stayed relatively stable, providing reassurance that broader inflationary pressures remain contained. He added that energy prices could still rise, especially with low natural gas storage levels ahead of winter, and that food prices may climb due to high input costs, droughts, and El Niño.

The ECB’s policy decisions will be made on a meeting‑by‑meeting basis, he said, as the bank scrutinises incoming data to determine the optimal timing and size of any further rate hikes. He also noted that monetary policy is transmitted homogeneously across the euro area, with no destructive effect of rising yields on other parts of the economy.

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