ECB policymaker Kazimir says at least one more rate hike will be needed
- At least one more rate hike will be needed
- Second round effecs costly to reverse, ECB must act before they are visible
- Deterioration of outlook would warrant more tightening than now expected
- Rate hike will be warranted even if inflation situation improves somewhat
ECB’s Kazimir has been one of the most hawkish members of the Governing Council and he maintains his stance with the latest remarks. In his view, at least one more rate hike will be needed to put the ECB in a better position against potential second round effects.
He stressed that second round effects are costly to reverse once they become embedded and for this reason the ECB should act before they are visible. He also added that a deterioration of the inflation outlook would prompt policymakers to deliver more rate hikes than currently expected.
Kazimir added that a rate hike will be needed even if inflation situation were to improve, suggesting he has already made up his mind about a September rate hike. As of now, the market is pricing in a 67% chance of a rate hike in September and a total of 38 bps of tightening by year-end.
This article was written by Giuseppe Dellamotta at investinglive.com.