Martins Kazaks, a member of the European Central Bank's Governing Council and governor of Latvia's central bank, said in a telephone interview with Reuters that the ECB may need to raise interest rates further in steps to contain inflation before higher fuel costs stemming from the war in Iran feed through to wages and other prices. The ECB raised its policy rate on the 10th to 2.5% from 2.25%, its second hike this year. Kazaks said that given energy prices and a broad range of inflation readings remaining elevated, "the momentum for further rate increases is building." He said the 2.5% level, which the ECB regards as the upper bound of its neutral range, should not be treated as a ceiling, adding that "rates may need to move into restrictive territory." Euro-area inflation stood at 3.3% in August, and the ECB expects inflation of 3.6% in the fourth quarter of this year.
ECB Governing Council member Kazaks says momentum for further rate hikes is building and rates may need to move into restrictive territory, pushing euro-area policy yields higher.
ECB rate-hike momentum building and rates possibly moving into restrictive territory strengthens the euro versus the dollar.
