By Marta Vilar – BANGKOK (Econostream) – European Central Bank Governing Council member Pierre Wunsch said on Wednesday that market expectations for further tightening appeared reasonable, citing persistent inflation and a resilient Eurozone economy, although heightened uncertainty warranted caution.

Wunsch, who heads the National Bank of Belgium, told Bloomberg TV that his assessment of the economic outlook had not changed significantly since the ECB's September meeting, pointing to stronger-than-expected growth despite elevated energy prices.

"Inflation is too high, so we have hiked,” he said, adding that the ECB is “probably going to have to hike again.”

However, he noted that uncertainty surrounding energy prices and developments in artificial intelligence made it difficult to predict the future path of monetary policy.

Wunsch said the eurozone economy had continued to demonstrate resilience, with second quarter growth of around 0.3% after adjusting for Ireland, a respectable performance given the challenging environment.

"The market is pricing that we are going to have to do more, so it's a base case that looks reasonable," he said.

Asked about the timing of the next rate increase, Wunsch noted that markets had previously priced in an October hike but no longer expected one at that meeting.

However, he declined to rule out an October move, saying policymakers would receive additional economic data before making their decision.

"We might have some more data coming up, so I'm not excluding anything," he said.

Wunsch also declined to express a preference between October and December, arguing that the precise timing of the next move was less important than the broader policy trajectory.

"At the end of the day it doesn't really matter whether it is October or December," he said, adding that heightened uncertainty reinforced the case for maintaining a meeting-by-meeting approach.

Wunsch acknowledged that financial conditions had tightened since the ECB's last policy meeting, particularly at the longer end of the yield curve, partly reflecting developments in US bond markets.

He said higher risk-free rates had also contributed to widening sovereign bond spreads in some Eurozone countries, exposing fiscal vulnerabilities in governments running excessive deficits.

According to Wunsch, higher borrowing costs could make already challenging fiscal positions less sustainable, increasing pressure on governments to bring their deficits under control.

He suggested that a degree of market pressure could be constructive insofar as it encouraged fiscal consolidation, although the broader tightening in financial conditions would need to be considered by policymakers.

"There is broadly speaking a tightening of financial conditions, so it is going to be part of our discussion in October," he said.

Asked about the possibility of ECB intervention in sovereign bond markets, Wunsch distinguished between market pressure that encouraged fiscal discipline and potentially unwarranted market movements.

He declined to speculate on whether or when the ECB might need to intervene, while reiterating that the central bank had instruments available to address unjustified market developments.

"There are some gray zones," he said, adding that the ECB had tools at its disposal if market developments became unwarranted.