Mucahithan Avcioglu
14 May 2026•Update: 14 May 2026
The European Central Bank may be forced to raise interest rates if higher crude oil prices begin to feed into inflation expectations, Governing Council member Martins Kazaks said Thursday.
“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 remarks came 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 complicate the disinflation process in the euro area.
Kazaks declined to confirm whether such a move is likely, saying: “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 jump in energy prices will remain a one-off shock or broaden into second-round effects through wages, corporate pricing behavior and household inflation expectations.
Energy costs are a key component of eurozone inflation, which jumped to 3% in April, and a prolonged rise in oil prices could slow the return of consumer price growth toward the ECB’s 2% target.
The bank’s June meeting is expected to be shaped by updated staff projections, incoming inflation data and signals from financial markets on the persistence of the oil-price shock.
Several ECB officials have recently indicated that policy decisions will remain data-dependent, with particular attention to underlying inflation, wage growth and the risk that geopolitical tensions could add fresh pressure to prices.
The ECB’s main refinancing rate currently stands at elevated levels after a series of policy adjustments aimed at bringing inflation under control following the post-pandemic energy shock and Russia-Ukraine war-driven price surge.
