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Europe may be heading for another interest rate increase, and households could once again feel the impact.
The European Central Bank (ECB) is signaling that another rate hike could be coming in September as it tries to keep inflation under control, with rising oil and gas prices creating fresh concerns.
Peter Kazimir, Slovakia’s central bank governor and a member of the ECB’s decision-making council, said the bank will likely need to raise rates at least one more time to prevent inflation from picking up again.
The warning comes after the ECB decided last week to keep rates unchanged but made it clear that another increase remains possible.
Why are prices rising again?
The main concern is energy.
Oil and gas prices have climbed following renewed tensions in the Middle East, raising fears that higher energy costs could eventually push up the price of everything from electricity bills to everyday goods and services.
So far, the increase in energy prices has not fully spread through the economy. Businesses have not yet widely passed those costs on to workers through higher wages or onto consumers through higher prices.
But Kazimir warned that inflation can build quietly.
"Once they become clearly visible, they are costly to reverse," he said, arguing that central banks need to act before the problem becomes bigger.
What does this mean for people?
Another ECB rate hike could mean higher borrowing costs for households and businesses, affecting mortgages, loans and credit.
Markets are already expecting more increases, with investors pricing in at least two possible rate hikes over the coming months. However, those expectations could change quickly depending on what happens with energy prices and global tensions.
Kazimir warned that if inflation proves stronger and lasts longer than expected, the ECB may have to go further.
"We will need to tighten more in the coming quarters than is currently expected," he said.
For now, the ECB is watching one key question: will energy prices settle down, or will they trigger another wave of inflation that forces Europe’s central bank to act again?
