ECB policymakers warn about growing inflation risks

FRANKFURT, July 24 (Reuters) - Inflation risks are ‌high and the European ​Central Bank ​may need to raise interest rates again in response to the Iran crisis, three policymakers said on Friday, but all stopped short of calling for a hike at the bank's ‌next meeting in September.

The ECB left its key deposit rate at 2.25% on Thursday after a ⁠raft of surveys and data, mostly from June, showed higher fuel costs from the Middle East were not yet spreading broadly to ‌consumer prices, wages and long-term expectations.

But ‌there were strong clues that a hike in September was likely, with oil prices back around $100 a barrel and natural gas prices also surging.

Policymakers, so far, have been measured in their public commentary.

"We are seeing ​in the Middle East that the situation remains highly fragile," Bundesbank President Joachim Nagel said in a statement. "We are still facing intense uncertainty."

Nagel said the hike in June put the ECB in a good position ⁠to respond to any deterioration in the inflation outlook.

RISKS REMAIN HIGH

The ECB said on Thursday that risks to economic growth were skewed towards more ​negative outcomes than projected while inflation risks were to the upside.

"The risks ahead remain high," Slovenian central bank chief Primož Dolenc said in a blog post, adding that ​developments around the war in Iran reinforce the adverse risk.

Austrian central ‌bank chief Martin Kocher, meanwhile, said a hike may become needed but it was not clear if it would be in September.

"I think everybody knows if the inflation ⁠outlook becomes worse, if there is a situation where inflation expectations deteriorate, for instance, the medium-term ones, then there is a necessity to act," he told Bloomberg TV.

Financial markets see at least two more rate hikes from the ECB with the ⁠first move fully priced in by October and the second by February. Market economists polled by Reuters, however, only see a ​single hike in September.

IMPROVEMENT BEFORE IRAN TRUCE COLLAPSED

ECB polls of companies, consumers and economists were all pointing to a moderation in the inflation outlook, although they were all carried out before a truce in the Middle East collapsed earlier this month, raising ‌oil prices again and rekindling inflation fears.

A broader survey of purchasing managers also showed activity was rebounding and inflationary pressures were easing.

"But given the re-escalation in the ‌conflict in the Middle East and the subsequent rise in energy prices, some of the improvements in both may be ⁠short-lived," Capital Economics said in a note.

Oil prices ‌were moving near the baseline of ​the ECB's June projections, which were predicated on more policy tightening in the months ahead.

(Reporting by Balazs Koranyi, Francesco Canepa and Francois Murphy; Editing by Kirsten Donovan, Jamie Freed and ‌Hugh Lawson)

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