ECB's Kazaks: One More Rate Hike Is a Reasonable Expectation
N.R. Finch
ECB Governing Council member Ulo Kaasik said Tuesday that at least one more rate hike is needed to bring inflation back to the 2% target; despite a sharper-than-expected drop in June inflation, he sees oil-price risks tilted to the upside, with wage pass-through as the biggest concern.
Why "at least one more hike"?
Kaasik told the Sintra forum that market expectations for one more hike are reasonable.
His logic: the oil-price shock from US-Iran tensions has not fully faded, and rates need to keep pressing down to pull inflation back to 2%.
This means → at least some ECB policymakers believe the current rate level is still not restrictive enough.
June inflation fell — why isn't that reassuring?
June inflation dropped more than expected, mainly because US-Iran peace talks pushed energy costs lower.
But Kaasik warned: some infrastructure has been damaged and some supply lines remain broken — the price impact could last longer than the headline number suggests.
In plain terms = oil prices dipped for now, but the pipelines and facilities that move oil are not yet repaired — prices could snap back at any time.
Will the July meeting deliver a hike?
Kaasik flagged two core uncertainties for the July 22–23 meeting: the geopolitical trajectory and oil prices, plus how three months of oil-price shock are passing through to other goods.
Some ECB officials have already signalled that July could be a hold, provided the external environment stays calm.
This means → July may not bring action, but "holding" requires the situation not to deteriorate further — the initiative lies with geopolitics, not the central bank.
What worries Kaasik most?
His biggest fear is wage pass-through: if the inflation shock triggers broad-based wage increases, price pressure shifts from a one-off hit to a self-reinforcing loop.
In plain terms = oil prices rise → consumer prices rise → workers demand higher pay → business costs rise → prices rise again. Once that loop starts, it is very hard to stop.
Kaasik said that if conditions stabilise, clearer signals should emerge by autumn — but he worries "this may not be the only shock we face."
Content is for reference only, not financial advice.