ECB’s Kazāks Sees Economy Holding Up, Stresses “Full Optionality” in Uncertain Outlook

19 December 2025

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Mārtiņš Kazāks on Friday said the euro-area economy has performed better than expected but policymakers must keep all options open amid global uncertainty.

Kazāks, who heads Latvijas Banka, told Bloomberg that wage growth was a key reason inflation had proven more stubborn than previously anticipated. At the same time, he said competitive pressure from China was likely to intensify, potentially exerting downward pressure on prices.

“Given high uncertainty, given that risks are on both sides, I think it’s still very appropriate to use the modus operandi that we have been using already for some time, which is data-dependent, meeting-by-meeting, with full optionality,” he said. “So, currently it is counter-productive to give forward guidance in terms of the direction of the rate.”

ECB forecasts published on Thursday showing headline inflation below 2% for most of 2026 and 2027 and core somewhat more elevated posed little cause for concern, he said.

“The deviations that we have in the forecast are relatively small,” he said. “Inflation expectations remain anchored, and I don’t see risks to that at the moment.”

Kazāks said a potential peace deal in Ukraine could improve economic momentum, depending on the substance of any agreement, and could help lift confidence, consumption and investment by encouraging households to draw down high savings.