ECB Governing Council member Bostjan Vasle has emphasized the need for further monetary tightening in the face of persistent inflation, speaking on the sidelines of the ECB Forum.

“Given the persistence of inflation, we need to keep tightening monetary policy at our next meeting,” Vasle stated.

Beyond July, the decision to further hike rates will be “data-dependent”. However, Vasle conveyed that the “burden of proof” lies in data indicating “further rate hike is not needed instead that it is needed.”

Vasle dismissed arguments that weaker growth readings might ease the ECB’s fight against inflation. He asserted, “All these suggest that growth developments are not significantly different than our most recent projections.”

The ECB official also expressed concerns over expectations that corporate profit margins might decline and absorb the impact of wage hikes, terming such a prospect as bearing significant risks.

“The labour market is strong and consumption is resilient. So firms might continue to enjoy pricing power, especially because demand is too strong to push down margins,” he said.

ECB Vice President Luis de Guindos has provided a somber outlook for the Eurozone’s economic performance, emphasizing both stubborn inflation pressures and slower economic growth in an interview with Bloomberg TV in Sintra, Portugal.

When discussing the ECB’s potential interest rate policy moves, de Guindos indicated that the decision to hike rates in July seems to be a “fait accompli”, while the situation for September is “open”.

De Guindos voiced his concerns about underlying inflation, which he expects to prove more stubborn than currently anticipated. The Vice President linked these persistent pressures to a potentially strong summer tourist season that could drive services costs higher.

Regarding the economy, “the data that we are receiving about growth are not very good,” he confessed, adding that “some of these downside risks have started to materialize and are becoming much more visible.”

ECB President Christine Lagarde, while speaking at the ECB Forum today , emphasized that the bank”s job was far from over. She reiterated that “barring a material change to the outlook, we will continue to increase rates in July.”

As ECB treads further into restrictive territory, Lagarde indicated that the central bank would be paying close attention to two aspects of its policy – the “level” of rates and the communication around future decisions, particularly in terms of “length” of time rates are expected to stay at that level.

She underscored the presence of two main uncertainties affecting the “level” and “length” of the bank”s interest rate policies.

The first is the uncertainty about inflation persistence, which makes the peak level of rates state-contingent. The second involves the uncertainty around monetary policy transmission, an issue heightened by the fact that Eurozone has not experienced a sustained phase of rate hikes since the mid-2000s and has never witnessed such swift rate rises.

Full speech of ECB Lagarde here.

ECB Governing Council member Martins Kazaks expressed concerns about the persistent high inflation, indicating that an economic slowdown may not be enough to counter it. He also pushed back against market expectations of an ECB rate cut in the first half of next year.

Kazaks stated, “The softness of the economy is unlikely to deal with inflation, which is still very high, with strong risks of persistence.”

Further suggesting the need for rate hikes beyond July, Kazaks said, “In my view, we will still need to raise rates and I don’t think that in July we’ll be comfortable enough to say: ‘we’re done’. I think rates will need to be raised past July but when and by how much will be data-dependent.”

Highlighting the divergence between his stance and market sentiments, he remarked, “The major problem with market pricing is the expectation of rates coming down so quickly. In my view, it’s wrong and the reason is that the market must be pricing in a different macro scenario with inflation coming down much more quickly.”

His views on potential rate cuts were very clear. Kazaks sees the need for rate cuts only when “it becomes quite certain that inflation is about to start significantly and persistently undershooting our target of 2%. And not at the end of the forecast period but towards the middle of the forecast period.”