ECB’s Kazāks: Impact on Inflation Projections To Be “Sizeable” if ETS Delayed

12 September 2025

By Marta Vilar – MADRID (Econostream) – European Central Bank Governing Council member Mārtiņš Kazāks said on Friday that if the Emissions Trading System were to be delayed, the impact on the ECB's inflation projections would be large.

In an interview with Reuters, Kazāks, who heads the Latvijas Banka, said that the ECB should refrain from giving any guidance given the geopolitical uncertainty, though substantial new data would be available by the December meeting.

“Of course, December is rich because we’ll get a new set of projections and we’ll see if there is a deviation from 2% and how large and persistent that is likely to be,” he said.

Postponing the Emissions Trading System would markedly affect inflation forecasts, according to Kazāks.

“The ETS 2 is baked into our projections for 2027 and is worth some 0.3 percentage points," he said. “If it doesn’t happen for political reasons, that would have quite a sizeable impact.”

A stronger euro and the rerouting of Chinese goods, which he described as “deflationary," were key risks for Kazāks.

“So, uncertainty is high and there are many risk scenarios,” he said, noting that it was one of the reasons why the ECB had to maintain its meeting-by-meeting, data-dependent approach.