European Central Bank must act to prevent inflation from taking root, says Kazaks

Martins Kazaks, a member of the European Central Bank’s Governing Council and Governor of the Bank of Latvia, says the ECB cannot afford to let consumer price gains linger above target. In a Bloomberg interview, Kazaks described the current inflation environment as “somewhat uncomfortable” and signaled the central bank’s readiness to tighten further if the data warrants it. Eurozone inflation is running at approximately 3%, a full percentage point above the ECB’s 2% goal. What Kazaks actually said, and what he didn’t Kazaks was careful to avoid pre-committing to any specific action ahead of the ECB’s September policy meeting. He stressed a data-dependent approach, noting that it remains “premature” to determine exact next steps. But he was unambiguous on one point. The ECB “won’t hesitate to act if needed” to bring inflation back to 2%. Markets are already pricing in a near-certain 25-basis-point increase to the deposit rate at the September meeting. That would follow a prior adjustment made in June. Despite the hawkish undertone, the euro barely moved on the remarks, ticking up roughly 0.26% against the US dollar. The economic backdrop is mixed, but not alarming Kazaks pointed to ...