Martins Kazaks, a member of the European Central Bank’s Governing Council, stated that the current deposit rate of 2.5% is not a ceiling. He suggested that further monetary tightening is necessary to combat inflation, which reached 3.3% in August 2026.
The ECB has raised rates twice in 2026, following a period of easing throughout 2025. Kazaks advocates for a measured approach to policy tightening rather than aggressive increases, noting that the central bank's target inflation rate remains at 2%.
Rising energy costs, driven by geopolitical conflicts in the Middle East, are identified as the primary factor behind persistent inflation. Kazaks warned that these pressures could become embedded in the economy through wage negotiations and higher consumer prices.
Financial markets are currently adjusting expectations, with investors anticipating a potential rate hike as early as October. Bond markets are reacting to the signals, as yields on government debt adjust to the prospect of further policy tightening.
