By Marta Vilar – MADRID (Econostream) – European Central Bank Governing Council member Mārtiņš Kazāks said on Tuesday that there is “no need to rush” the ECB's next monetary policy decision as the Iran conflict unfolds, noting that the shock creates opposing pressures on the outlook.
In an interview with Reuters, Kazāks, who heads Latvijas Banka, said that the ECB “should sit tight” and wait for greater clarity before taking action, adding that the Governing Council’s March meeting could include scenario analyses assessing how the Iran conflict might affect the economic outlook.
“But I don’t see that we need to rush to do something with policy rates,” he said.
The February flash CPI data would keep the ECB “in a cautious mood,” with inflation already at a higher level amid the energy shock, according to Kazāks.
He added that the current level of interest rates was “appropriate,” noting that markets had until recently been pricing in a rate cut and that such expectations were still “within the high uncertainty interval.”
The ECB should remain ready to move rates in either direction, he said, and that would depend on “how inflation develops, how high it is, what are the second-round effects and how persistent it becomes, and if this feeds through into inflation expectations.”
There were “opposing forces coming from this shock,” he said, adding that the ECB’s response would depend on “which one is stronger.”
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