Peter Kazimir, Governor of the National Bank of Slovakia and ECB Governing Council member, stated that natural gas prices have reached four-year highs. Low storage levels across the EU, exacerbated by geopolitical tensions related to the Iran conflict, have created a supply deficit ahead of the winter season.
The ECB raised its key policy rate to 2.5% during its September 10–11 meeting, up from 2.25%. This move marks the second rate hike of 2026. Kazimir noted that inflation risks remain tilted to the upside, suggesting that elevated price levels could persist in the euro area until 2027.
Market participants are pricing in a 60% probability of another rate increase at the upcoming ECB meeting on October 29. If approved, the policy rate would rise to 2.75%. Kazimir highlighted that rising energy costs are impacting electricity generation, food production, and fertilizer manufacturing.
Higher input costs for agriculture and processing are expected to influence consumer prices in the coming quarters. The combination of tighter monetary policy and increased spending on heating and groceries is putting pressure on European household purchasing power and consumer discretionary stocks.
