By Marta Vilar – MADRID (Econostream) – European Central Bank Governing Council member Mārtiņš Kazāks said on Monday that the outlook was currently between the baseline and adverse scenarios, adding that the direction of interest rates was “relatively clear” unless the economy suffered a deeper shock.

Kazāks, who heads Latvijas Banka, told Politico that the war was “dragging on longer and the price level for oil is higher than we had expected in the baseline,” thus pushing the outlook “more towards the adverse scenario.”

He said the baseline scenario already included two interest rate hikes, and that current conditions stood between the baseline and adverse scenarios.

“Unless the economy suffers another much deeper shock, for example energy shortages, then the direction of the policy rate is relatively clear,” he said.

Kazāks said there were few signs that the economy would contract enough to offset inflation and require easier monetary policy.

“But of course, given that all the major shocks over the past year have come from politics, those things could happen,” he said.

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