By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Ülo Kaasik left open the need for further monetary tightening Friday, saying inflation risks remained skewed upward and could require additional rate increases if they materialized.

Speaking to Bloomberg, Kaasik, who heads Eesti Pank, did not indicate the likely timing of any further rate move, stressing instead the uncertainty surrounding developments in the Middle East.

“For me, inflation risks are tilted to the upside,” he said. “If these risks materialize, we may have to raise rates further.”

With energy developments still central to the outlook, Kaasik cautioned against drawing firm conclusions about the policy path.

“I see a risk that energy price pressures will remain elevated for longer, but the situation is uncertain and it can change quickly,” he said. “When it’s foggy outside, you have to take careful steps.”

The precise location of the neutral rate was not currently a major constraint on policy, according to Kaasik, who also indicated that the present stance was not strongly restrictive.

“The neutral rate matters, but the exact threshold isn’t a big concern at the moment,” he said. “It’s clear that rates are not very restrictive right now.”

While second-round effects had yet to emerge, Kaasik said preventing them remained an important task for policymakers.

“We haven’t seen second-round effects yet,” he said. “But our job is to make sure that they don’t materialize.”