ECB's Kazimir moves his inflation watch from oil to gas at four-year highs

Take the futures pricing at face value and the October 29 meeting is worth about 2.65 percent in expectation: a 60 percent chance of 2.75 percent, a 40 percent chance of the rate sitting where the September 10-11 meeting left it, at 2.5 percent ^{[10][7][1][2]}.

Gas reaches the euro-area price index by two routes at two speeds. Gas-fired plants still set the marginal price in many European wholesale power markets, according to Cryptobriefing, so a gas move lands fast on the electricity bills of manufacturers, food processors and cold storage operators ^[12]. The slower route runs through fertiliser. Natural gas is a feedstock for nitrogen-based fertiliser, and the same account argues that four-year highs in gas lift farm input costs which reach retail shelves only after several quarters ^[13][14]. Kazimir flagged food inflation as a growing concern and said the knock-on effects for heating bills, power costs and food prices have not fully materialised ^[15][8].

"My attention is now focused less on oil and fuel prices, but increasingly on gas and electricity prices," Kazimir wrote in a blog post on September 14 ^[2][6]. He is governor of the National Bank of Slovakia and one of the Governing Council's voting members ^[1]. He also called inflation risks "clearly tilted to the upside" ^[9]. Cryptobriefing takes that phrase to mean the Council sees a greater probability of inflation surprising higher than lower in coming quarters ^[11].

The 2027 in the piece is a claim about prices: gas at four-year highs and depleted storage could keep euro-area inflation elevated well into 2027 ^[3][4]. The only futures probability the report gives is the one for October 29 ^[18]. A 25 basis point move in September and a 60 percent chance of another next month describe this quarter's balance of votes ^[3][10]. Inflation running hot into 2027 and a policy rate still climbing in 2027 are two different statements.

A central bank raising rates into an energy supply shock is betting on second-round effects. Rate rises act on demand, and the storage sites answer to supply. Kazimir attributes the delayed summer filling campaigns to volatile conditions around the Iran conflict ^[5]. If the pass-through into food takes quarters, as Cryptobriefing says it does ^[14], the Council votes in October on evidence it will not yet have. In my view the hike lands, because a voting member publishing "clearly tilted to the upside" six weeks before a meeting is previewing a vote ^[9]. The counter-case is the household: tighter credit and higher energy bills squeeze the same wallet twice, which the publication calls a double squeeze on consumer discretionary names ^[16], and a Council that tightens into that has further to unwind if gas falls back. A year ago the market was pricing an extended easing cycle ^[17].