ECB: Kazimir says June rate hike is just the first step in the fight against inflation
The first secondary effects are beginning to emerge
"What began as an external energy shock is no longer confined to the fringes of our economy. It is spreading throughout the economy." This is the view expressed by Governor Peter Kazimir in a statement published on the Slovak central bank’s website, in which he emphasises that "price pressures along the production chain are mounting. This is an undesirable transition that requires vigilance on the part of the ECB and a readiness to act. Thursday’s decision to raise interest rates was a measured and necessary step.
"We are seeing signs that price pressures are spreading beyond the most volatile components and are affecting day-to-day economic activity." According to Kazimir, “this is not the time for complacency or hesitation. Higher energy costs are likely to remain with us for longer than many had hoped. Even with the recently announced peace deal between the US and Iran, the damage in the Middle East cannot be undone overnight.” "Secondary effects and ripple effects must be monitored closely. The ripple effects, whilst not yet fully visible, may be on the horizon. They are forming in the background and, without deliberate action on our part, would eventually materialise."
"We have taken a first step towards containing price pressures in the medium term. But the job is not yet done. Based on the information available to us today, it is increasingly clear that monetary policy still has work to do." "The encouraging aspect," concluded Kazimir, "is that the economy continues to show resilience, as it has done repeatedly in the past. Growth remains weak, but structural factors are also contributing to this. Although the exact scale and timing of our next moves will depend on incoming data, the direction of travel is clear. Personally, I favour getting on with the work that needs to be done. But in times of high uncertainty, being agile and ready to react to new information is a good guiding principle."
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