BNB Governor Radev says a further ECB rate rise may be needed if inflation pressures persist

A further increase in the European Central Bank's key interest rates may be necessary if incoming data confirm that inflationary pressures are becoming more persistent, Bulgarian National Bank (BNB) Governor Dimitar Radev said on 3 November at the opening of the OMFIF Sofia Forum at Boyana Residence, BTA reported. At its December meeting, the ECB Governing Council will have updated forecasts that will help it judge how long the energy shock will last and how far it spreads to prices and wages.

Radev described the Governing Council's October decision to leave its three key rates unchanged, after increases in September, as appropriate. He stressed, however, that the pause did not mean monetary tightening had ended. "This does not imply a pre-commitment to any specific decision," he said, adding that decisions are taken meeting by meeting on the basis of new data.

Euro area inflation reached 3.8% in September, with energy prices rising faster than the ECB expected in its September forecast. The ECB's Survey of Professional Forecasters has raised expectations for headline inflation in 2027 to 2.6% and for core inflation to 2.5%, while long-term expectations remain at 2%. Core inflation is relatively stable and there is no evidence of a broad pass-through of energy costs to wages, Radev said, but policymakers should not wait for second-round effects to appear in full.

He also warned that rising long-term bond yields and tighter bank lending conditions are constraining demand. Uncertainty over public finances or changes to the rules under which businesses operate can undermine confidence and discourage investment, he said, and fiscal responses to the energy shock should be temporary and well targeted.

Since the start of 2026, the BNB has been a full member of the Eurosystem. Radev pointed out that inflation in Bulgaria stood at 5.6% in September on the harmonised measure, against 3.8% for the euro area, and that domestic risks remain even though external ones have fallen.

Bulgarian banks are well capitalised and liquid, Radev said, but lending is growing fast, especially for mortgages. Strong indicators are not grounds for easing requirements but an opportunity to keep adequate buffers before risks materialise, he added.