ECB’s Kažimír: September ‘Earliest Date To Answer How Effective Our Measures Are’

9 May 2023

By David Barwick – FRANKFURT (Econostream) – The European Central Bank will have to continue to hike interest rates at each of the next two Governing Council monetary policy meetings if not beyond, Council member Peter Kažimír said Tuesday.

In a statement issued on the website of the National Bank of Slovakia, which he heads, Kažimír said that the decision last Thursday to decelerate to a 25bp hike ‘does not mark the end of the path, nor does it say that job’s done.’

Core inflation, wage pressures and high profit margins ‘reconfirm the need to continue on our path’, he said, even if the apparent peaking of inflation and tighter credit conditions made it possible to ‘return to what can be called “business as usual”’ with a slower pace of tightening.

‘But as I said, the battle against inflation is far from won and there’s a plenty of ground left to cover’, he said. ‘Based on today’s data, we will have to keep raising interest rates for longer than anticipated. 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.’

The evolution of data and fiscal policy in the coming months would be key, he suggested. The ‘jury is still out there’ with respect to what he called the ‘reluctance of European governments to exit non-targeted fiscal measures’ that could force a stronger policy response.

Although monetary policy was being transmitted, he said, ‘we can only assess the cumulative impact of higher interest rates and tightening conditions on financial markets after September.’

‘Therefore, our September forecast will be the earliest date to answer how effective our measures are and whether inflation is moving towards the target’, he said. ‘The answer will come in autumn.’