European Central Bank policymaker Martin Kocher warned that the ECB will need to raise interest rates further if oil prices remain around $100 a barrel through year‑end. Speaking after the ECB lifted its key rate by a quarter point to 2.5% on Thursday, Austria’s central bank governor said inflation risks have risen as Middle East tensions keep energy prices high. Oil has surged more than 45% since the US‑Iran ceasefire collapsed in early July, while European gas prices have nearly doubled to just under €80 per megawatt‑hour.

The ECB’s adverse scenario assumes an average oil price of $99 and gas at €77 per MWh in Q4, which would push inflation to 3.2% next year — missing the 2% target for a second year. Kocher stressed that monetary policy cannot control oil prices, so a temporary inflation overshoot is unavoidable, but it must be short‑lived and return to target within about a year. Investors now price in another quarter‑point hike to 2.75% by year‑end and a further increase in early 2027.

Kocher said it is too early to signal the ECB’s stance for its October meeting and that policy will stay data‑dependent unless surprising developments occur.