The European Central Bank will have to raise interest rates again to prevent high inflation from becoming entrenched, Slovak central bank chief Peter Kazimir has warned, adding that financial markets may still be underestimating what is needed to bring price pressures under control.
Kazimir, a hawkish voice on the ECB’s 27-member Governing Council, spoke on Monday after the bank left rates unchanged last week. Since then, a number of policymakers have argued for adding to the ECB’s two rate rises sooner rather than later, pointing to sky-high energy costs that they say will eventually feed through into wider prices.
“For me, the question is increasingly not whether further action will be needed but how much more will be required,” Kazimir said. “Markets may still underestimate what is required. The issue is not one meeting or one move. It is the path needed to bring inflation back to target and keep it there,” he added.
Financial markets currently price in between two and three ECB rate rises over the next year before a slow retreat, as market-based inflation indicators suggest price growth will remain well above the bank’s 2% target for years to come.
The ECB held rates steady last Thursday on the grounds that second-round effects — where higher costs feed into wages and then into prices more broadly — have yet to take hold, wage growth is muted, and growth is likely to suffer from surging longer-term borrowing costs. Kazimir said those arguments were not necessarily as reassuring as some think.
Cost pressures, he argued, can build up before businesses pass them on, and expectations can shift before wider price pressures show up in the data. “Waiting for certainty does not necessarily make for good policy,” he said. A slowdown in growth, he added, does not necessarily weaken inflation, since cost pressures have already been building for months.
Growth itself, Kazimir said, is relatively solid because government budgets are cushioning the economy — and a lack of fiscal prudence can itself keep price pressures up. His message was blunt: “Last week’s pause was not a finish line. We should act before high inflation starts to feel normal.”
The warning sharpens the debate inside the ECB over timing. Policymakers who favour moving sooner argue that waiting until second-round effects are visible in official data risks acting too late, while those who favour holding steady point to muted wage growth and the drag from higher borrowing costs. For households and businesses across the euro zone, the practical question is how far and how fast borrowing costs rise from here — and Kazimir’s intervention suggests the hawkish camp believes the answer is further than markets currently assume.
Note: the featured image is a file photo of the European Central Bank building in Frankfurt from July 2019, not a photograph of Peter Kazimir or of the ECB’s latest meeting.
Sources: Reuters, “ECB will have to raise rates again, extent uncertain, Kazimir says”, 2 November 2026, https://www.reuters.com/business/ecb-will-have-raise-rates-again-extent-uncertain-kazimir-says-2026-11-02/
