ECB’s Kazaks says mustn’t allow inflation to remain above 2% into 2026

European Central Bank Governing Council member Kazaks (governor of Latvia’s central bank). He was pretty blunt on the policy backdrop, saying that the Bank must not allow inflation to remain above 2% into 2026.

ECB projections are that the 2% target inflation rate will only be met towards the end of 2025. Kazaks is clearly concerned about delays beyond this.

He said that while uncertainty remains high, his policymaker colleagues are are confident that disinflation is proceeding, which allows a less restrictive policy approach. But, that could change if upward price pressures were more stubborn:

• “Currently I think we are still on the path to 2% in the second half of 2025, and I would really hope that we would do it by that time,”
• “We should not drag this problem into 2026”
• “If data show that reaching our target is being pushed out beyond 2025, then of course the restriction level needs to be maintained for longer so that we can avert those kind of outcomes.”

This article was written by Eamonn Sheridan at www.forexlive.com.