ECB might need to keep raising interest rates for longer than initially anticipated, according to Governing Council member Peter Kazimir. His comments indicate an evolving stance within ECB as it grapples with stubbornly high inflation in the Eurozone.
“Based on today’s data, we will have to keep raising interest rates for longer than anticipated,” Kazimir stated. He suggested a slower pace of rate hikes, at 25 basis points increments, as a measured approach that allows for longer-term adjustments, should incoming data warrant it. “So, slowing down the pace to 25 bps is a step that will allow us to go gradually higher for longer, should that be necessary and warranted by incoming data,” he explained.
Kazimir pointed to core inflation trends, rising wage pressures, and high-profit margins as factors necessitating vigilance and the continued pursuit of the ECB’s current monetary policy trajectory. “The development of core inflation, the continued buildup of wage pressures, and high-profit margins call for vigilance and reconfirm the need to continue on our path,” he said.
However, the true effectiveness of the ECB’s measures and the trajectory of inflation towards the target will not be fully assessed until the September forecast. “Our September forecast will be the earliest date to answer how effective our measures are and whether inflation is moving towards the target,” Kazimir added.
