The European Central Bank will likely need to raise interest rates further, according to Governing Council member Pierre Wunsch.

“We are probably going to have to hike again,” the Belgian central-bank governor told Bloomberg Television on Wednesday. “But I’m not making any bet anymore because we have so much uncertainty on the energy front, maybe also AI.”Speaking on the sidelines of the International Monetary Fund’s annual meeting in Bangkok, Wunsch wouldn’t say if that meant a move later this month or at the final rate decision of the year.

“At the end of the day, it doesn’t really matter whether it’s October or December,” he said. “The market is pricing that we are going to have to do more. So it’s a base case that looks reasonable, but again, we are in a very uncertain world.”The ECB is debating whether to add to the two rate hikes this year to quell inflation that’s approaching 4%. Price pressures are concentrated on energy for now, with policymakers stressing that they’re seeing no second-round effects like rising wages.

Economists are anticipating a final move in December, which would take the deposit rate to 2.75% — a level where it’s estimated to start restricting economic activity. Some, including Chief Economist Philip Lane, have said that a “measured” policy response should suffice to restore price stability.

“Inflation is too high,” Wunsch said, adding that “market expectations have moved” and now “don’t expect a hike in October” anymore. “We say we’re data dependent, meeting by meeting. We might have some new data coming in, so I’m not excluding anything.”Growth has been surprisingly resilient to the energy-price spike triggered by conflict in the Middle East. However, further escalation in the Iran war remains a key risk and President Christine Lagarde has warned that surging bond yields will weigh on activity more than previously expected.

Speaking separately, Lagarde said that elevated euro-area inflation driven by high energy prices is yet to feed into the broader economy.

ECB officials are determining “how much indirect effects are traveling through the economy, and see how best we can anticipate if second-round effects are showing up,” she said. “We are not seeing any of that yet, but we have to be extremely careful that little signs, indices of such secondary effects are visible.”A sharp rise in French government borrowing costs has put the focus on the ECB’s crisis fighting tools, including the so-called Transmission Protection Instrument it devised in 2022. It’s meant to contain unwarranted market moves and allows the central bank to buy unlimited amounts of government debt.

“I don’t want to speculate on the if and when” of the ECB potentially stepping in, Wunsch said. “We have this instrument, you’ve mentioned it, the TPI. There are some gray zones, and I’m not going to speculate on all the potential gray zones. But it’s there, and we have instruments if developments would become unwarranted.”

The conditions to deploy the tool are unlikely to be met at present, however, as investors are responding at least partly to political gridlock over the country’s budget. Bank of France chief Emmanuel Moulin has also warned that the ECB isn’t there to “deal with the fiscal problems of countries.”

“Having some market pressure in a way is even helping because they can tell their constituencies, ‘Look, if we don’t do it, then we’re going to have to face much higher interest costs on our debt’,” Wunsch said. “But we know that politically, it’s not easy to reduce the deficit, and that’s a reality.”Rising government borrowing costs across developed economies in Europe, America and elsewhere are a major theme at the Bangkok gathering of global finance officials. IMF chief Kristalina Georgieva urged policymakers last week to take urgent action to reduce high debts and budget deficits.