By Marta Vilar – MADRID (Econostream) – European Central Bank Governing Council member Mārtiņš Kazāks said on Monday that the ECB remained in a position to adjust interest rates gradually, citing stable oil price developments and an effective transmission of monetary policy.
In a blog post published on the website of Latvijas Banka, which he heads, Kazāks said uncertainty remained elevated and that inflationary pressures had become broader.
“No significant second-round effects are yet to be seen, and medium to longer-term inflation expectations remain stable,” he said. “Short-term inflation expectations have increased significantly since the start of the conflict, and companies point to rising price pressures, which are likely to lead to further short-term price increases.”
Kazāks said the ECB’s recent rate hike was intended to contain inflationary pressures and reduce the risk of second-round effects.
“Such a gradual increase is appropriate and justified under various possible development scenarios – both if risks materialize on the upside and if they materialize on the downside relative to the baseline scenario,” he added.
Pointing to subdued oil price developments in recent weeks and the smooth transmission of monetary policy, Kazāks said these conditions continued to allow for “gradual adjustments in interest rates.”
“With this decision, the Governing Council of the ECB remains well positioned to respond to future developments, if necessary, in order to contain inflationary pressures and ensure a return to the 2% target over the medium term,” he said.
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