Staff Writer
Martins Kazaks, a member of the Governing Council, believes that the European Central Bank may need to raise interest rates following the anticipated increase in July, which many analysts anticipate to be the final one in this cycle.
Although the economy of the 20-nation euro zone is “on the soft side,” the Latvian official stated that it is not weak enough to reduce inflation on its own. According to him, borrowing costs will “by no means” decrease in the first half of 2024 as some investors had predicted.
Given the knowledge I currently have on the economy, I would not feel comfortable declaring that we are finished in July, Kazaks said on Bloomberg Television on Tuesday. “I believe that rates would need to be raised further.”
To get inflation back to the desired 2% level, policymakers are debating how much higher borrowing costs should be raised.
After the anticipated rate hike in July, some have suggested that the ECB’s historical cycle of rate increases may stall, but others have raised the possibility that monetary tightening will continue well into the fall.
At the ECB’s annual retreat in Sintra, Portugal, Kazaks noted that for meetings that take place beyond July, policymakers will continue to be reliant on data. “September will be decided in September, and October will be decided in October,” he declared.
Whatever the outcome of such discussions, according to Kazaks, the ECB will be able to continue raising rates even after it takes a break.
Pausing does not equal stopping, he argued, and this is a crucial point for the markets to understand. “Whenever it’s necessary, we can raise the interest rates.”
