The European Central Bank (ECB) may be forced to raise interest rates if higher crude oil prices start feeding into inflation expectations, Governing Council member Martins Kazaks said on Thursday, News.Az reports, citing Anadolu.
“Oil prices are higher, we see that it’s gradually starting to push inflation up, and if inflation expectations start to deteriorate, then the ECB will be forced to raise interest rates,” Kazaks, who heads Latvia’s central bank, told public broadcaster LTV.
His comments come as investors and economists increasingly expect the ECB to deliver a 25 basis-point rate hike at its June policy meeting, amid renewed concerns that the Iran war and disruptions around the Strait of Hormuz could keep energy prices elevated and further complicate the euro area’s disinflation process.
Kazaks did not confirm whether such a move is likely, stating: “At the moment the financial markets are pricing an increase — I can’t confirm or deny.”
“We’ll see if that situation comes. But if we look at the scenario analysis and at our forecasts, then the situation is a bit worse than it was initially forecast in the base case,” he added.
The ECB has been closely monitoring whether the recent rise in energy prices will remain a temporary shock or spread into broader inflation pressures through wages, corporate pricing behavior, and household inflation expectations.
Energy costs remain a key driver of eurozone inflation, which rose to 3% in April. A sustained increase in oil prices could slow progress toward the ECB’s 2% inflation target.
The bank’s June meeting is expected to be shaped by updated staff projections, incoming inflation data, and market signals regarding the persistence of the oil-price shock.
Several ECB officials have recently signaled that policy decisions will remain data-dependent, with close attention to underlying inflation trends, wage growth, and the risk that geopolitical tensions could add additional price pressures.
The ECB’s main refinancing rate currently remains at elevated levels following a series of policy tightening moves aimed at controlling inflation after the post-pandemic energy shock and the Russia–Ukraine war-driven price surge.
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