ECB’s Kažimír: Baseline Scenario a July Hike; What Comes Then Is an Open Question

19 June 2023

By David Barwick – FRANKFURT (Econostream) – The European Central Bank will have to hike rates again in July, but the way forward thereafter is not foreordained, ECB Governing Council member Peter Kažimír said Monday.

In a statement issued on the website of the National Bank of Slovakia, which he heads, Kažimír said that the decision last Thursday ‘was a no-brainer for me’ and that given inflation prospects over the next two years, ‘a continuation of monetary policy tightening is the only reasonable way ahead.’

‘Anything else is out of the question’, so that last week’s 25bp hike was ‘not the end of the road’, he said. ‘For starters, we need to deliver another rate hike in July and move further into the restrictive territory.’

The entire Council was conscious of the costs imposed by higher interest rates on economic actors, he said, but high inflation was the greater danger and upside risks to prices were ‘still substantial’.

September would bring a ‘more comprehensive view and analysis’ of previous tightening’s impact, he said. Hopefully, fiscal policy, in many countries ‘not precisely helping’, would adjust so as not to force the ECB to counteract its expansionary effect, he said.

‘All in all, my baseline scenario for July is another hike’, he said. ‘As for September action, it’s open and remains to be seen what will be done. … Incoming data, updated inflation and economic outlook will decide our actions after the summer break.’