By Marta Vilar – MADRID (Econostream) – European Central Bank Governing Council member Peter Kažimír said on Wednesday that an interest rate move by the ECB could be closer than markets expected.

In an interview with Bloomberg, Kažimír, who heads the National Bank of Slovakia, said that the ECB remained in a “good place” and did not need to adjust policy at the March meeting.

“For the time being, we need to stay calm,” he said, adding however that “I’d say a reaction by the ECB is potentially closer than many people think.”

Kažimír declined to speculate on whether action could come in April or June but stressed that the ECB “will be ready to react if needed.”

“The situation is very volatile — dramatic even — and a panicking by markets and politicians could be a risk,” he said.

He explained that he had already been concerned about inflation before the latest developments involving Iran, pointing to persistent services inflation, goods prices not having slowed quickly enough, and profit margins having widened — factors that now worried him even more.

“The balance of risks regarding inflation has clearly shifted to the upside,” he said. “We can forget about all the discussions about an inflation undershoot.”

Inflation expectations, which he viewed as an early signal of price pressures, had begun to increase, he noted.

“Businesses still remember the inflation years and will likely pass through higher costs much more quickly to consumers than in 2022,” he said. “And people will ask for higher wages more quickly than in the past.”

The ECB should be able to react “more quickly” if needed and had to be “agile,” he said.

He also suggested that updated macroeconomic forecasts would not be necessary for the ECB to act.

“I have no reservations against hiking without new forecasts, he said. “What’s clear is that considerations on further cuts are definitely off the table now.”

Despite the uncertainty, he said he was still “quite optimistic on growth” and not “too worried” about stagflation.

 

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