ECB's Kazimir: Markets Underestimate Rate Hike Path, Pause Is Not the End
nashnova research
ECB Governing Council member Peter Kazimir warned that markets may still be underestimating how much tightening is needed to tame inflation; last week's rate pause, he said, is a stop along the way — not the destination.
What exactly did Kazimir say?
The core message: the question is no longer *whether* to hike again, but how much more.
He said markets' rate-hike pricing may still fall short. This means → the current consensus ceiling of two to three more hikes could be breached.
In plain terms = a hawkish ECB insider thinks investors are betting too early on peak rates.
Didn't the ECB just pause?
The ECB held rates steady last Thursday, citing three reasons: no visible second-round inflation effects, moderate wage growth, and rising long-end borrowing costs already weighing on the economy.
Kazimir pushed back directly: those reasons may not be as reassuring as some believe.
His logic: corporate cost pressures may be building before they show up in final prices; inflation expectations can shift ahead of broader price data. This means → waiting for confirmation in the numbers may already be too late.
Won't a slowing economy cool inflation on its own?
Kazimir's answer: not necessarily. Cost pressures have been accumulating for months; slower growth may not offset them.
He flagged two under-appreciated forces: government fiscal cushions propping up the economy and a lack of fiscal discipline — both can keep pushing prices higher.
In plain terms = the government is spending with one hand to support growth while failing to rein in deficits with the other — one hand cools, the other heats.
What are markets pricing now — and what does it mean for investors?
Financial markets currently price in two to three more ECB hikes over the next year, followed by a slow descent.
Market-based inflation gauges show price growth staying above the 2% target for years to come.
This reflects an acceptance that inflation will be slow to fall — but Kazimir's hawkish stance signals that the rate ceiling may not yet be in sight. If more Council members share his view, the rate path could end up steeper than current pricing implies.
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