By David Barwick – FRANKFURT (Econostream) – The European Central Bank needs time to determine whether the persistent energy shock is spreading to longer-term inflation expectations, wages and prices before deciding its next move, Governing Council member and Národná banka Slovenska Governor Peter Kažimír said Monday.

“Our decision to raise interest rates is a measured response to a highly uncertain environment in which inflation risks are clearly tilted to the upside,” Kažimír said in a blog post on his institution’s website.

“We move with purpose, not haste,” he said. “September’s rate hike preserves our flexibility. We will base future decisions on the data available at each meeting.”

The energy shock had already persisted longer than many expected, while its full consequences had not yet passed through to the economy, Kažimír said.

“The longer elevated energy costs persist, the greater the risk that they become embedded in longer-term expectations, wages and prices,” he said.

The ECB needed time to determine whether indirect effects were developing broadly in line with its projections and whether demand and labor-market conditions were strong enough to generate second-round effects, he said.

Kažimír said his attention was shifting away from oil and fuel prices and increasingly toward gas and electricity prices. Food inflation was also expected to increase, with the extent of that acceleration partly dependent on weather developments, he said.

The euro area economy’s greater than expected resilience was encouraging, but had “caveats and limits,” Kažimír said. Some aspects of the stronger economy could add to upside inflation risks, although energy remained the principal source of risk to prices, he said.

Kažimír expressed confidence that financial markets understood the ECB’s reaction to incoming information, giving policymakers room for “careful observation and judgement” and allowing them to act when necessary.

“We should not confuse an open mind about the next decision with hesitation,” he said. “Our job is clear: to bring inflation back to target.”

“In an environment of exceptional uncertainty, flexibility is a strength, not a weakness,” Kažimír said. “We will take each decision when it is needed, and we will not waver when the evidence calls for action.”