His Arguments on Second-Round Inflation Effects

Kazimir's case for a September hike rests heavily on the threat of second-round effects from energy price rises, which he says are already materializing and will persist without ECB action . He argues that higher energy costs are spreading into wages and broader prices, and that even a potential US-Iran peace deal would not return inflation to 2% without further rate increases . He has stated that the ECB "will not hesitate to act if inflation risks staying above target for a prolonged period" .

This puts him notably more hawkish than his colleague, Governing Council member Kocher, who said on July 24, 2026, that he does "not see any hard evidence of second-round effects" but would act if the outlook deteriorated . The divergence highlights an increasingly fractured Governing Council as it heads into the September 9-10 meeting.

How This Aligns with the July 2026 Hold at 2.25%

The ECB kept its benchmark deposit rate at 2.25% following its July 22-23 meeting, a decision that was unanimous but laced with internal debate . ECB President Christine Lagarde noted during the press conference that some governors "asked themselves" about hiking further, and the official statement explicitly said the ECB is "closely monitoring the impact of rising energy prices" and left room for more tightening in coming months . Kazimir's hawkish Monday comments align perfectly with this posture — the door was left open, and he is now publicly pushing for a September hike.

The ECB's rate path in 2026 represents a sharp reversal from the 2025 easing cycle. After cutting rates through much of 2025, the bank hiked in June 2026 and then held in July 2026. The July hold was widely seen by markets as a pause, not a peak, with financial markets pricing in roughly two more hikes by the end of the year, starting at the September meeting .

The Data Behind the Hawkish Turn

Kazimir's position is squarely supported by the most recent official ECB staff projections (June 2026 baseline), which paint a worrying picture :

• Headline HICP inflation is expected to peak at 3.4% in the third and fourth quarters of 2026, driven by a surge in energy inflation as a result of the conflict in the Middle East .
• Inflation is projected to remain above 3.0% until early 2027 before declining gradually .
• Real GDP growth is forecast at a subdued 0.8% in 2026, weighed down by the Middle East conflict and trade uncertainty, recovering to 1.2% in 2027 and 1.5% in 2028 .

The ECB's macro projections page notes that if oil prices decline in line with futures markets, inflation should return to the 2% target in 2028, but "the outlook is highly uncertain" due to the war in the Middle East .

Supporting this view, the ECB's Survey of Professional Forecasters (SPF) for the second quarter of 2026 showed that headline HICP inflation expectations for 2026 were markedly revised upwards to 2.7%, with long-term expectations unchanged at 2.0% . This reinforces the market pricing for additional rate increases.

The scale of the revision is significant. Just six months earlier, in the December 2025 Eurosystem staff projections, headline inflation was expected to average only 1.9% in both 2026 and 2027 . The war-driven energy price shock since then has completely upended that outlook.

The Wider Council Debate

Kazimir is now the leading voice for a September hike, but he is not without countervailing pressure:

• Lagarde (July 23 presser): Presented a unanimous hold but confirmed that some governors raised the possibility of hiking. She emphasized data-dependence and no pre-commitment, maintaining the ECB's standard posture .
• Kocher (July 24): Said he sees "no hard evidence of second-round effects" yet, but the ECB "will act if the inflation outlook deteriorates" — effectively a more dovish counterweight to Kazimir .
• Earlier consensus: An official ECB account of the September 2025 Governing Council meeting noted that "a consensus had formed" that interest rates were in a "good place" and close to the end of the monetary policy cycle . That consensus has now been fractured by the Middle East conflict.

What This Means for Markets

As of the July 2026 meeting, markets were already pricing in further tightening. The Reuters report on the July decision notes the ECB "left room for more tightening in the coming months as a widening conflict in the Middle East pushed up energy prices again" . Financial markets were pricing in roughly two more hikes by the end of the year, starting at the ECB's next meeting on September 9-10 .

Bottom line: Kazimir is leading the hawkish wing, arguing that a September hike is needed to preempt second-round effects from energy prices. The July hold was widely interpreted as a pause rather than a peak, and the official ECB data now supports further tightening — especially with the June 2026 projections showing inflation peaking above 3% in H2 2026. The September meeting will be the critical test of whether the doves or hawks prevail within the Governing Council.

However, the high degree of uncertainty around the Middle East conflict and its impact on energy prices means that the ECB's actual decision in September will depend heavily on incoming data over the next six weeks, including August inflation figures and the Eurosystem staff projections due for release in September.

His Arguments on Second-Round Inflation Effects

Kazimir's case for a September hike rests heavily on the threat of second-round effects from energy price rises, which he says are already materializing and will persist without ECB action . He argues that higher energy costs are spreading into wages and broader prices, and that even a potential US-Iran peace deal would not return inflation to 2% without further rate increases . He has stated that the ECB "will not hesitate to act if inflation risks staying above target for a prolonged period" .

This puts him notably more hawkish than his colleague, Governing Council member Kocher, who said on July 24, 2026, that he does "not see any hard evidence of second-round effects" but would act if the outlook deteriorated . The divergence highlights an increasingly fractured Governing Council as it heads into the September 9-10 meeting.

How This Aligns with the July 2026 Hold at 2.25%

The ECB kept its benchmark deposit rate at 2.25% following its July 22-23 meeting, a decision that was unanimous but laced with internal debate . ECB President Christine Lagarde noted during the press conference that some governors "asked themselves" about hiking further, and the official statement explicitly said the ECB is "closely monitoring the impact of rising energy prices" and left room for more tightening in coming months . Kazimir's hawkish Monday comments align perfectly with this posture — the door was left open, and he is now publicly pushing for a September hike.

The ECB's rate path in 2026 represents a sharp reversal from the 2025 easing cycle. After cutting rates through much of 2025, the bank hiked in June 2026 and then held in July 2026. The July hold was widely seen by markets as a pause, not a peak, with financial markets pricing in roughly two more hikes by the end of the year, starting at the September meeting .

The Data Behind the Hawkish Turn

Kazimir's position is squarely supported by the most recent official ECB staff projections (June 2026 baseline), which paint a worrying picture :

• Headline HICP inflation is expected to peak at 3.4% in the third and fourth quarters of 2026, driven by a surge in energy inflation as a result of the conflict in the Middle East .
• Inflation is projected to remain above 3.0% until early 2027 before declining gradually .
• Real GDP growth is forecast at a subdued 0.8% in 2026, weighed down by the Middle East conflict and trade uncertainty, recovering to 1.2% in 2027 and 1.5% in 2028 .

The ECB's macro projections page notes that if oil prices decline in line with futures markets, inflation should return to the 2% target in 2028, but "the outlook is highly uncertain" due to the war in the Middle East .

Supporting this view, the ECB's Survey of Professional Forecasters (SPF) for the second quarter of 2026 showed that headline HICP inflation expectations for 2026 were markedly revised upwards to 2.7%, with long-term expectations unchanged at 2.0% . This reinforces the market pricing for additional rate increases.

The scale of the revision is significant. Just six months earlier, in the December 2025 Eurosystem staff projections, headline inflation was expected to average only 1.9% in both 2026 and 2027 . The war-driven energy price shock since then has completely upended that outlook.

The Wider Council Debate

Kazimir is now the leading voice for a September hike, but he is not without countervailing pressure:

• Lagarde (July 23 presser): Presented a unanimous hold but confirmed that some governors raised the possibility of hiking. She emphasized data-dependence and no pre-commitment, maintaining the ECB's standard posture .
• Kocher (July 24): Said he sees "no hard evidence of second-round effects" yet, but the ECB "will act if the inflation outlook deteriorates" — effectively a more dovish counterweight to Kazimir .
• Earlier consensus: An official ECB account of the September 2025 Governing Council meeting noted that "a consensus had formed" that interest rates were in a "good place" and close to the end of the monetary policy cycle . That consensus has now been fractured by the Middle East conflict.

What This Means for Markets

As of the July 2026 meeting, markets were already pricing in further tightening. The Reuters report on the July decision notes the ECB "left room for more tightening in the coming months as a widening conflict in the Middle East pushed up energy prices again" . Financial markets were pricing in roughly two more hikes by the end of the year, starting at the ECB's next meeting on September 9-10 .

Bottom line: Kazimir is leading the hawkish wing, arguing that a September hike is needed to preempt second-round effects from energy prices. The July hold was widely interpreted as a pause rather than a peak, and the official ECB data now supports further tightening — especially with the June 2026 projections showing inflation peaking above 3% in H2 2026. The September meeting will be the critical test of whether the doves or hawks prevail within the Governing Council.

However, the high degree of uncertainty around the Middle East conflict and its impact on energy prices means that the ECB's actual decision in September will depend heavily on incoming data over the next six weeks, including August inflation figures and the Eurosystem staff projections due for release in September.