ECB Official Kazaks Warns of Additional Monetary Policy Tightening

Latvia Central Bank official and European Central Bank (ECB) Governing Council Member Kazaks stated that further monetary policy tightening might be necessary if inflation continues to hover above the target.

In an interview published on Econostream, the Latvian official reported that the situation where inflation remains well above target still persists and that if this condition continues, a little more tightening in monetary policy might be necessary. However, emphasizing the need to be cautious due to opposing factors, Kazaks noted that these forces include the recent rise in bond yields, which carries the risk of putting pressure on the European economy.

Stating that additional tightening from the markets could slow economic growth and alleviate some of the inflationary pressures, Kazaks expressed that the economy and the labor market are not yet strong enough to push wage demands to new highs again. It was reported that the ECB will make its next interest rate decision on October 29, and the vast majority of investors anticipate that policymakers will keep the deposit interest rate at 2.5 percent.