- Kazimir warns that persistent inflation could require further ECB interest rate hikes.
- Rising energy and food prices, alongside a weaker euro, could increase inflationary pressure.
- The ECB plans to launch a 12-month digital euro pilot in the second half of 2027.
Slovakia’s central bank chief Peter Kazimir warned on November 2 that persistently high inflation could require the European Central Bank (ECB) to raise interest rates further, suggesting that markets may be underestimating the monetary tightening needed to bring inflation back to target.
Separately, the ECB announced on October 30 that it had selected two technology and telecommunications groups to provide network services for its digital euro project, marking another step toward testing the proposed central bank digital currency.
Kazimir Warns Inflation Could Require Further Rate Hikes
In a separate statement on November 2, Slovakia’s central bank chief Peter Kazimir warned that the ECB’s recent decision to hold interest rates steady should not be viewed as the end of monetary tightening. He cited persistent energy price pressures, rising food prices, and a weaker exchange rate that makes imports more expensive.
Kazimir said rising costs could eventually spread through the economy as businesses pass higher expenses on to consumers. He also warned that inflation expectations could shift before broader price pressures become visible in official data.
The ECB’s next policy decision is expected in December, when policymakers will have access to updated forecasts and additional economic information. Kazimir did not specify the number or size of any potential rate increases. However, he said markets might be underestimating how much further tightening would be needed to bring inflation back to the ECB’s target and keep it there.
For financial markets, the comments signal that interest-rate expectations could change if inflation remains persistent. However, the digital euro project and monetary policy decisions follow separate processes. Progress on the digital euro’s legislation and infrastructure should therefore be monitored independently of developments that could influence the ECB’s interest-rate decisions.
ECB Selects Two Digital Euro Network Groups
The ECB announced on October 30 that it had selected two groups to provide network services for the digital euro project.
The first group involves Nexi Payments and Deutsche Telekom Business Solutions. Their contract entered into force on September 28 and will initially provide connectivity for the digital euro pilot. The second group consists of Telefónica and Indra’s technology arm, Minsait. Its contract will start in May 2027.
The ECB’s official announcement states that both groups will connect participating payment service providers and national central banks to the digital euro service platform and enable communication between its components.
Both network providers will be ready as of 2029 to provide connectivity services for a potential digital euro issuance. Payment service providers will be able to choose either network to connect to the digital euro platform, subject to the ECB Governing Council’s decision on the project’s next phase.
Digital Euro Pilot Planned for 2027
The ECB intends to launch a 12-month pilot in the second half of 2027. Thirty-six selected payment service providers will participate in testing payments and assessing the system’s technical and operational capabilities.
However, the selection of network providers and the planned pilot do not constitute final approval for issuing the digital euro. The ECB has stated that a decision on issuance will only be made after the relevant European legislation is adopted and the Governing Council makes its decision. The pilot will help test the system and assess its readiness ahead of that decision.
The ECB is moving ahead with its digital euro preparations, while Kazimir’s warning puts the eurozone’s inflation outlook and potential rate hikes back in focus.
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