Hike rates

ECB will continue raising rates to slow inflation, Kazaks say

The European Central Bank will continue to raise interest rates, according to Governing Council member Martins Kazaks.

“At the moment what we see is that inflation is unacceptably high, in Latvia above 20%,” Kazaks said in an interview with Latvia’s TV3.

“Monetary policy has already become more restrictive from last December: at the beginning we were reducing the support programs and in the last months we were also increasing interest rates considerably and we will continue to increase interest rates in order not to allow inflation” to take root. , he said.

Kazaks, who heads Latvia’s central bank, also said it would be more painful to let inflation continue. “To fight inflation you also need fiscal policy and structural policy,” he said.

The eurozone economy grew slightly less than initially expected in the second quarter as signs continue to emerge that momentum is unraveling.

Production rose 0.6% from the previous three months between April and June, against a preliminary reading of 0.7%, Eurostat said on Wednesday. Employment, meanwhile, rose 0.3% during this period.

While the data still suggests Europe’s economy was on relatively solid footing heading into the summer, analysts fear energy shortages could lead to even higher record inflation, tipping the continent into a a recession.

A two-quarter slowdown is now more likely than not, according to a Bloomberg survey, which puts the probability at 60%.

Meanwhile, euro zone government bond yields rose on Thursday after European Central Bank board member Isabel Schnabel stoked inflation anxiety by saying prices consumption could accelerate further in the short term.

The outlook for inflation hasn’t improved since a July rate hike, Schnabel said, suggesting she favors another big interest rate hike next month.

The bloc’s borrowing costs jumped on Wednesday on inflation fears after UK price growth hit double digits, distracting investors from less monetary tightening due to downside risks. recession.