By David Barwick – BANGKOK (Econostream) – European Central Bank Governing Council member Mārtiņš Kazāks said Thursday that inflation pressures were likely to remain dominant in the near term and that the direction of monetary policy was therefore clear, while adding that policymakers were not under immediate pressure to raise rates again.

Kazāks, governor of the Bank of Latvia, told Bloomberg that the ECB was not behind the curve and therefore had room to proceed without rushing.

“My feeling is that the inflationary forces will still be stronger in the immediate future,” he said. “So the direction of policy is clear, even if there isn’t any immediate need to rush on rates.”

“We’re not behind the curve, so in that sense, we’re well positioned,” Kazāks said.

Kazāks said the inflation outlook remained the more pressing concern, while warning that adverse developments in the economy could materialize in a less gradual fashion.

Risks to inflation on the upside were “still bigger than the risks to growth on the downside,” he said, while risks to economic expansion “are at risk of being more nonlinear.”

“The tradeoffs for monetary policy are going to get more tricky,” Kazāks said. “So far, the decisions have been relatively easy. But there’s a lot of uncertainty and very low visibility.”

Kazāks also said market turbulence would matter for the ECB if it became disorderly, but warned against treating monetary policy as the answer to every bout of sovereign or financial stress.

“Unwarranted volatility in financial markets would be a worry, but it doesn’t mean that any stress in financial markets becomes our problem,” he said.

“There’s still time to fix the fiscal issue, and I would urge it to be done,” Kazāks said.

He said using monetary policy as a general-purpose response to such problems would be “very shortsighted and counterproductive.”

“Of course, transmission of monetary policy is of interest to us and we will follow that,” Kazāks said. “If things become disorderly, we will do what is necessary. But we shouldn’t try to solve every possible problem.”