Inflation pressure persists; two ECB officials speak out: a rate hike may be needed in December.

Two ECB officials spoke out successively on Tuesday, reinforcing market expectations for a December rate hike. Governing Council member Kazaks said current conditions may make a December rate hike necessary; Chief Economist Lane said inflation has not yet peaked and a December rate hike would be prudent. Kazaks: A December rate hike may be necessary, but the policy trade-off is more delicate Kazaks said current conditions may make a December rate hike necessary, but he also warned that judgments on tightening policy are becoming increasingly delicate. "The trade-offs ahead will become more delicate, because ultimately we must achieve our inflation target, but not at the cost of excessively damaging the economy," Kazaks said. "From today's perspective, it appears necessary to tighten policy further." Markets still expect at least two more 25-basis-point rate hikes. Kazaks believes rates are already at the upper end of the neutral range for the economy, but he declined to speculate on how much more tightening is needed. "Let's see what the data brings," he said. "We have also seen some pullback in stock markets, which may further slow growth. We have also seen government bond yields rise, which may also slow some economic growth." Nevertheless, he noted that current consumer price risks remain clearly visible. Therefore, monetary policy should carry a "hawkish tint." "With inflation at 4% and above, there is of course a risk of pushing up inflation expectations," he said. "If necessary, I think we should not be afraid to raise rates cautiously." Lane: Inflation has not yet peaked; a December rate hike is prudent Earlier the same day, Lane said policymakers should raise rates at the next meeting in December, noting that inflation has not yet peaked. Lane said that from now to December, oil prices "may fluctuate significantly," but by year-end the inflation rate will most likely be "slightly above" 4%, with food and core prices likely to accelerate, especially in the first quarter of next year. "If the information we have in December is exactly the same as today, then I think a rate hike is indeed prudent," he said in London on Tuesday. "The peak in inflation has not yet arrived." The ECB is assessing how much more force is needed to curb inflation. The current inflation rate is twice the 2% target. Since the US attack on Iran in February, the ECB has raised the deposit rate twice, and officials have signaled willingness to raise rates again in December. However, the drop in oil prices after the US midterm elections may temporarily curb price increases. Investors see a December rate hike as more likely and expect further tightening in 2027. Lane said the ECB will "follow the data" next year and urged traders not to focus solely on commodities for direction. "I would like to see the market reprice, not only in line with energy prices, but also in line with broader macro developments," he said. Lane said the European economy is currently growing steadily at a moderate pace, and its resilience so far is "quite reassuring." "We should strive to raise the growth rate of the European economy through reforms," he added. Lane's eight-year term will end in May 2027, and France intends to put forward a candidate to succeed him in the role. The arrangement will be part of a broader personnel package involving the positions of President Christine Lagarde and Executive Board member Isabel Schnabel both of whom will leave early in early 2027.