European Central Bank official Cassieck: Market reasonably expects central bank to raise interest rates again

Member of the European Central Bank Governing Council, Kask expressed that due to the impact of the Iran conflict, it may be necessary to further tighten monetary policy to ensure that inflation falls back to the target level. The Estonian central bank governor stated in Sintra, Portugal: "The market generally expects the central bank to raise interest rates again. At present, it is reasonable to raise interest rates at least once more. Taking this step is necessary to ensure that inflation falls to 2% in light of the oil shock we are facing, which has become a common consensus." Speaking about the policy meeting on July 22nd and 23rd, Kask said: "On one hand, we need to see how the geopolitical situation develops and the trend of the oil market; on the other hand, we need to observe the impact of three months of oil price shocks on various commodity prices." He also proposed the need for a more in-depth analysis to clarify the logic of changes in commodity prices. "Some energy infrastructure has been damaged, and multiple supply chains have not yet recovered, so the impact is likely to have long-term consequences." He said, "Of course, there is also an optimistic scenario: a successful peace agreement, Iran's oil returning to the market, and a significant drop in oil prices. But in my view, the risk of inflation rising is greater, although we still need to maintain an objective and cautious judgment." Another major concern closely monitored by policymakers is whether the rise in inflation in the euro area will lead to continuous wage increases, thus solidifying upward pressure on prices, making it difficult to dissipate in the long term. "This is the risk I am most worried about," Kask said, "If the situation stabilizes, we will have clearer wage data this autumn, but unfortunately, we are facing more than just oil prices at the moment."