ECB’s Kazāks: October Rate Hike Should Be at Least 50bp

28 September 2022

By David Barwick – FRANKFURT (Econostream) – The European Central Bank should hike interest rates next month by at least 50 basis points, according to ECB Governing Council member Mārtiņš Kazāks on Wednesday.

In an interview with Bloomberg, Kazāks, who is Governor of Latvijas Banka, said that inflation expectations ‘are still more or less where they should be’, but with second-round effects becoming ‘more transparent and obvious’, a ‘very strong, resolute and clear-cut’ policy reaction is needed.

A move of ‘at least 50 basis points would be appropriate’ in October, he was quoted as saying. ‘The increase needs to be strong and significant, and at the current moment, I would say 50 or 75 basis points.’

Kazāks stressed the importance of core inflation and of not letting up in the fight against inflation in the event that core inflation were to subside for a month or even a quarter.

As for quantitative tightening, he urged discussing it soon but was willing to wait with implementation.

‘The sooner we discuss it, the better it is, but that doesn’t mean -- and this is what I think the market should understand -- it doesn’t mean if you discuss it today, we employ tomorrow’, he said. ‘The first thing we need to do is get some policy space with interest rates.’