ECB Governing Council member Christodoulos Patsalides said there was no justification for raising interest rates at last week's meeting because inflation remains broadly in line with the ECB's projections, inflation expectations are well anchored, and there is currently little evidence of second-round inflation effects or excessive wage growth.

However, he warned that the risk to inflation is steadily increasing as elevated oil prices persist. The longer energy prices remain high, the more likely they are to spread into other goods and services, making inflationary pressures broader and more persistent. He stressed that "the passage of time definitely works against us on inflation," saying upside inflation risks accumulate every day the energy shock continues.

Patsalides said the September policy meeting remains fully data-dependent, but indicated that the case for acting pre-emptively becomes stronger as inflation risks build. While policymakers still need evidence before tightening policy, he argued that they cannot necessarily wait until all second-round effects become clearly visible, because monetary policy must remain ahead of inflation.

He said he has not yet decided how he will vote in September. According to Patsalides, the Governing Council will closely monitor incoming data, including evidence of second-round effects, inflation expectations, wages, purchasing managers' indexes (PMIs), and the transmission of higher oil prices through the economy.

Patsalides also rejected the idea that the ECB is committed to future rate hikes simply because they are embedded in the market yield curve used for the ECB's projections. He said policy decisions are not constrained by market assumptions and will always depend on the latest economic data and risk assessment. In his view, rate hikes in ECB projections do not obligate the central bank, and policy cannot depend on today's yield curve.

He described the current monetary policy stance as neutral to restrictive and said interest rates are currently at the appropriate level, while acknowledging that this assessment could change if inflation risks continue to intensify. He added that as inflation risks rise, the balance shifts toward pre-emptive action.

Patsalides also opposed returning to forward guidance, arguing that public commitments about the future path of interest rates would reduce the ECB's flexibility and credibility during a period of elevated uncertainty.

The remarks land as policymakers continue to weigh whether recent inflation dynamics are temporary or broadening through the economy, with energy costs still a key input into that assessment. Market pricing currently reflects expectations for further tightening, but Patsalides' comments underline that the ECB will still base any decision on incoming data rather than on assumptions embedded in its projections.

The market is currently pricing in a 65% chance of a rate hike at the September meeting and a total of 37 basis points of tightening by year-end.

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