ECB’s Kazāks: Quite Likely That a Rate Hike Happens This Year
16 February 2022
By David Barwick – FRANKFURT (Econostream) – A lift-off of official euro area borrowing costs is quite probable this year, European Central Bank Governing Council member Mārtiņš Kazāks said Wednesday.
In an interview with Bloomberg, Kazāks, who is Governor of Latvijas Banka, said with respect to a rate hike by the ECB, ‘It’s going to be data-dependent. We’ll see, but it’s quite likely that it happens this year.’
The situation has become ‘more clear-cut’, he said, according to the news agency. ‘We see inflation significantly above what we saw in the past and that shifts the gravity.’
Still, he warned of the consequences for the recovery of rates going up too fast, urging that authorities be ‘careful and gradual’ and suggesting that expectations of two 0.25-point hikes this year were overdone.
‘It’s important not to rock the boat’, he said. ‘We need to steer it in a way that’s relatively smooth, that markets understand what we’re doing. And we see what the economy’s doing.’
The next meeting of the Governing Council wouldn’t necessarily provide complete clarity for the rest of the year, he said. ‘It would be unrealistic to expect that in March we’ll provide a blueprint for exactly what in every month we’ll do going forward’, he said. ‘It’s incompatible with the strategy we use. It’s gradual, it’s data dependent and it’s flexible.’
Wage pressure could materialize ‘quite soon’, according to Kazāks. ‘When we see this happening, we shouldn’t hesitate from the monetary-policy point of view to act, to avoid second-round effects.’