“We need to act before high inflation starts to look normal”: Bank of Slovakia governor calls further ECB rate hikes inevitable
For Peter Kazimir, governor of the Bank of Slovakia, soaring energy costs could lead to second-round effects which would fuel inflation a little more without intervention from the ECB.
The European Central Bank (ECB) will have to raise interest rates again to prevent high inflation from persisting, and it is possible that markets underestimate the scale of the necessary measures, Peter Kazimir, governor of the Bank of Slovakia, warned on Monday. The ECB kept rates unchanged last week, but since then several ECB officials have argued for another hike in borrowing costs, on top of the two already adopted in June and September, and called for it to be implemented as soon as possible, arguing that high energy costs could lead to second-round effects. “For me, the question is no longer so much whether further measures will be necessary, but rather how many more will be necessary,” declared the man who is also a member of the Governing Council of the ECB and a leading figure among the supporters of a restrictive monetary policy.
"Markets may still be underestimating what is needed. It's not about a single meeting or a single measure. It's about the path to take to get inflation back to its target and keep it there," he added.
No side effects at this stage Financial markets are now counting on two to three rate increases from the ECB over the coming year. Last Thursday, when it kept its rates unchanged, the ECB cited the absence of secondary effects on inflation, wage growth which remains moderate and the risks represented for the economy by the dizzying rise in financing costs. According to Peter Kazimir, these figures are not necessarily as reassuring as some think, because cost pressures could build up before companies pass them on.
“Waiting until we have certainty is not necessarily good policy,” he said. He also cautioned that slowing growth does not necessarily weaken price increases, since cost pressures have already been building for months. "Last week's break was not a finish line (...
"We need to act before high inflation starts to look normal," he said.
Machine-translated from French
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- BFM Business2 Nov, 12:08
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