ECB’s Kažimír: Inflation Outlook ‘Speaks Clearly in Favour of the Need to Continue’
17 March 2023
By David Barwick – FRANKFURT (Econostream) – The European Central Bank will have to continue to hike interest rates, but there is no point in speculating about the precise path, Governing Council member Peter Kažimír said Friday.
In a statement issued on the website of the National Bank of Slovakia, which he heads, Kažimír said that he was ‘satisfied with Thursday's decision and fully support[s] it’, arguing that ‘[t]he captain of the ship must not deviate from the course just because a side wind suddenly leans against the ship.’
The outlook for inflation over the entire forecast horizon ‘speaks clearly in favour of the need to continue’, he said. ‘Whether, how vigorously, in how many steps and to what extent...time and data will show.’
‘Even the current events on the financial markets do not change my opinion that it is necessary to continue’, he went on. ‘I am very well aware of the delicacy of the situation, but at the same time I think that, despite the bumpy road we are on, we are not yet at our destination.’
‘Core inflation is stubbornly "sticky"’, he said. ‘Inflation risks exist on both sides, but in my view the risks are much greater to the upside.’
Still, the tightening moves made thus far are ‘starting to work’, he said.
As for the May decision, it is ‘useless to speculate’ about this, he said. Core inflation, wages, corporate profitability and fiscal policy ‘will co-decide when we will stop raising rates’, he said.
The latter in particular was ‘a risk that we must not underestimate’, he said.
According to Kažimír, the recent market turmoil was not the ‘pilot episode of a new global mess’, but rather ‘a reminder of the need to be vigilant.’
European banking regulation is a layer of protection that lets citizens ‘sleep contentedly, knowing that even in case of fundamental problems, we are able to handle the given situation’, he said.
This is why the Governing Council decided on the ‘inevitable and necessary’ 50bp hike yesterday, he said.