By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Ante Žigman said Wednesday that any further increase in interest rates would depend mainly on the inflation outlook and on energy and refined-product prices, stressing the need to prevent the latest price shock from becoming entrenched.

Žigman, who heads the Croatian National Bank, said at a conference in Zagreb that it was important that inflation “does not become entrenched” and that rate decisions would continue to depend on the data available at each Governing Council meeting.

The recent rise in inflation was being driven above all by energy prices, he said, adding that the focus was now less on crude oil than on refined products. Uncertainty surrounding the war in the Middle East remained pronounced, while higher refinery margins were adding to fuel-price pressures, he said.

According to Žigman, growth in the euro area in the first half of the year had been better than the ECB had expected. At the same time, projections for growth and inflation in the baseline scenario had been revised slightly higher relative to June, he said.

For Croatia, there had so far been no spillover from energy inflation into other components, Žigman said. “For now there is no pass-through of energy inflation to other segments,” he said, adding that food inflation had come to a complete halt and that the inflation differential relative to the euro area had narrowed significantly.

Price developments in Croatia would depend heavily on demand, Žigman said, but he said they were not expected to rise excessively given stabilizing wage growth and convergence toward the European Union.