European Central Bank official Primoz Dolenc has indicated that another interest rate hike may be necessary when policymakers meet in September. The Slovenian central-bank governor pointed to stronger-than-anticipated economic expansion and ongoing energy price pressures as reasons for further tightening.
Dolenc stated at the Federal Reserve's Jackson Hole symposium, "The arguments support a September increase to protect our inflation target. Recent data shows inflationary pressures aren't easing on their own."
The ECB raised rates in June, and financial markets widely expect another quarter-point hike when officials reconvene. Other policymakers including Executive Board member Isabel Schnabel and Latvia's Martins Kazaks have recently signaled support for additional measures.
July figures showed eurozone inflation picking up pace, with Dolenc highlighting that energy costs stay high due to Middle East tensions. While second-quarter GDP surprised to the upside, the central bank remains focused on its price stability mandate.
"By December, we'll have another set of projections for the next three years and clarity about other developments," Dolenc said. "This will give us more clarity about the inflation path over the medium term."
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Minutes from the ECB's July meeting showed discussions about whether somewhat restrictive policy might be required to hit the 2% inflation target. Chief Economist Philip Lane has indicated 2.5% likely marks the ceiling for neutral rates.
A major focus for ECB officials is whether elevated energy costs could trigger lasting wage increases that embed inflation. Dolenc observed these second-round effects haven't yet emerged but warned against inaction.
"We shouldn't wait for them to appear," he cautioned. "If economic actors doubt our commitment to the inflation target, these effects could materialize."
The policymaker also commented on recent bond market movements, noting higher yields help contain inflation expectations. "Increasing yields actually serve our objectives," Dolenc said, adding that tighter policy may be warranted after supply shocks.
The September 14 rate decision will reveal whether officials act on these hawkish signals as they weigh inflation risks against growth prospects. With updated forecasts coming in December, policymakers may use the intervening months to determine if more steps are needed to stabilize prices.