ECB's Kocher Warns Further Rate Rises Needed If Oil Stays Near USD 100

On September 11, 2026, the European Central Bank announced a 25 basis point rate increase, lifting its policy rate to 2.5%. It was the central bank's second rate rise in three months and its second of 2026.

Martin Kocher, governor of the Austrian central bank, said the ECB would have to raise rates further if oil prices remain near USD 100 a barrel through the end of 2026. He noted that persistent Middle East tensions and high energy prices have increased inflation risks compared with several months ago. Should oil and gas prices move further toward the adverse scenario, monetary policy must take those changes into account, and inflation risks would accelerate further.

Since the collapse of the US-Iran ceasefire in early July 2026, oil prices have risen by more than 45% and broke above USD 100 a barrel in the week of September 11, 2026. European gas prices have nearly doubled since June 2026, approaching EUR 80 per megawatt-hour. In the ECB's most severe inflation scenario, crude oil averages USD 99 a barrel and gas EUR 77 per megawatt-hour between October and December 2026. Under ECB model estimates, inflation would rise to 3.2% in 2027 if that scenario materializes, meaning the central bank would fail to meet its 2% medium-term inflation target for two consecutive years.

Kocher said monetary policy cannot influence oil prices, and that Europeans will have to endure a degree of high inflation in the short term, but the high-inflation phase must be brief and inflation needs to return to the ECB's target within about a year. Under the ECB's baseline scenario, if oil averages around USD 90 a barrel in the fourth quarter of 2026, inflation will fall back to 2% by the end of 2027.

Kocher said everything must be done to meet the inflation target, but it is too early to discuss the policy stance for the ECB's next meeting at the end of October 2026. He also said the situation in October 2026 cannot be predicted at this stage, and that unless unexpected developments occur, ECB policy will be determined by high and rising inflation risks. Kocher noted there is no clear evidence yet that higher energy costs have passed through to broader price or wage increases, but the central bank is monitoring this closely, especially wage and employee compensation trends.