By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Gediminas Šimkus said Friday that a September interest rate increase was much more likely than another hold, while stressing that the Council would have additional inflation data before deciding.

“I will just repeat what I said before this decision: the probability that interest rates will increase is much higher than that they will not – I stand by that,” the Bank of Lithuania chair told LRT radio.

Šimkus said there had been no reason to rush into a decision on Thursday. The Governing Council would decide on the basis of the information available at each meeting and receive additional inflation data before meeting again in September, he said.

“The risks are tilted to the upside for inflation. The environment is quite supportive of inflation,” he said.

“So we do not see any second-round effects, but on the other hand, inflation itself remains above the target level for a long enough time into the future, which requires decisions,” he said.

The likely direction of the next decision was nevertheless “sufficiently clear,” Šimkus said, pointing to the views of market participants and economists as well as market pricing.

The ECB directly set only the shortest-term interest rates, while expectations had already pushed up rates in financial markets, he said.

Businesses and households should therefore not be surprised by a future ECB increase, as they could already see those expectations reflected in the interest rates and loan payments they faced, Šimkus said.

He said developments since the ECB’s June increase illustrated the exceptionally high uncertainty surrounding the outlook. The U.S.-Iran ceasefire had initially returned oil prices to their pre-conflict level, before renewed tensions drove them sharply higher again, he said.

“Yesterday the price of oil was already $100 per barrel again. And again this will inevitably have repercussions on the inflationary background,” Šimkus said.

“So the first thing is very high uncertainty,” he said.

The inflationary environment had become more elevated and risks to the euro-area outlook were increasing, Šimkus said. The absence of second-round effects did not remove the need to respond if inflation remained above the ECB’s 2% target for a prolonged period, he said.