ECB Governing Council member Robert Holzmann expressed concerns over the inflationary environment, stating, “We’re not yet in the clear when it comes to inflation.” He accentuated the need for continued rate increases, suggesting that barring unforeseen circumstances, there could be a compelling case to “push on with rate increases without taking a pause” come September.

Holzmann emphasized the advantages of achieving the peak rate swiftly, noting, “It’s better to achieve a peak rate faster, which also means we can eventually start going lower earlier.” He highlighted the challenges for markets in navigating a sporadic “stop-and-go rate path.”

Furthermore, Holzmann acknowledged that the ECB has been “somewhat behind the curve” in its endeavors to combat inflation. When quizzed on the possibility of continued rate hikes beyond September, he remarked that once rates reach the 4% threshold, the matter would be up for discussion again.

On the topic of Eurozone’s economic health, Holzmann offered a measured perspective. While conceding that the economy isn’t performing at the anticipated level, he was quick to dismiss fears of an impending recession. He characterized the current economic landscape as one of stagnation, stating, “We’re looking at a stagnating economy.”

ECB Governing Council member Boris Vujcic acknowledged the restrictive nature of the ECB’s present stance. However, he tempered this by highlighting the uncertainty that remains, suggesting that the real test of the bank’s approach lies ahead.

“Whether we are in a restrictive-enough territory remains to be seen. And this is something that you will only see from the inflation data that will come in the next prints,” he emphasized.

Despite indications of a cooling economic activity, Vujcic pointed out that this deceleration is not as evident in the current inflation rates. The upcoming months, according to him, will be crucial in discerning the direction of services inflation and in understanding “whether we will feel the consequences of the slowdown in the labor market.”

While ECB expects to reach its 2% inflation target in 2025, Vujcic said that “by spring next year, we will have a clearer picture of whether we are firmly on the path toward achieving that or we will have to do more.”

ECB Governing Council member Joachim Nagel, in remarks made yesterday, reinforced his stance on the ongoing monetary tightening efforts of the central bank. Addressing speculations around a potential pause, he firmly stated, “It’s for me much too early to think about a pause,” emphasizing the significant gap between the current inflation rate and ECB’s target.

Nagel pointed out the glaring disparity between the present inflation situation and ECB’s benchmark, saying, “We shouldn’t forget inflation is still around 5%. So this is much too high. Our target is 2%. So there’s some way to go.”

Despite the overarching concern regarding a slowdown in economic activity in Eurozone, Nagel highlighted the persistence of core inflation and characterized the labor market as being “really pretty good.”

Dismissing prevalent narratives surrounding Germany’s economic health, he countered, “I hear a lot of talk about Germany, the sick man of Europe. This is definitely not the case.” Concluding on an optimistic note, Nagel added, “I’m still pretty optimistic that we will have a soft landing.”

ECB Governing Council member Mario Centeno, indicated yesterday that the transmission of ECB’s policy is “up and running” and pointed out the rapidity with which inflation has decelerated, noting its descent has outpaced its ascent.

However, he urged prudence, stating, “We have to be cautious this time around because downside risks that we identified in June in our forecast have materialized.” This marks a shift from the pattern observed throughout the pandemic recovery, where, as Centeno highlighted, “usually we have been surprised on the upside.”

Centeno also hinted at the uncertainty ahead, observing, “There’s plenty of data still to be made available until the September decision.” He further emphasized the significance of the upcoming forecast, mentioning, “We have a new forecast. That forecast will tell us precisely how we see this transmission of our decisions into inflation and the economy.”