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| Attack on Iran could bring rate hikes sooner |
| Bratislava, 12.03.2026 |
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| The war in Iran and its negative impact on inflation may force the European Central Bank (ECB) to raise interest rates earlier than expected. This was pointed out in a recent interview with Bloomberg by Peter Kažimír, Governor of the National Bank of Slovakia (NBS) and member of the ECB Governing Council.
According to him, the central bank is still in a “good position” and there is no need for it to act at next week’s meeting. Kažimír did not want to speculate on the April or June date, but according to him, the ECB will be ready to act if necessary. He fears that memories of the inflation shock from 2022 have lowered the threshold at which companies reach for price increases and consumers demand higher wages. Therefore, pro-inflation risks clearly prevail.
“The situation is very volatile - even dramatic - and panic in the markets and among politicians can pose a risk,” Kažimír assessed. He indicated that he was not satisfied with the situation even before the events in Iran. According to him, service prices show high inertia, goods prices are not falling fast enough, and companies' profit margins are growing.
At this point, the NBS governor is even more worried. "The risks related to inflation have clearly shifted upwards. We can forget all the discussions about inflation below the target," he stated. According to him, inflation expectations are starting to grow, which are an early indicator of the long-term consequences of price shocks.
According to Kažimír, the ECB's quarterly projections, which are due to be published this month and again in June, are not a necessary condition for changing rates. "I have no reservations about raising rates even without new forecasts. However, it is clear that considerations of further cuts are completely out of the question today," he emphasized.
According to Bloomberg, Kažimír's commitment to being prompt is in line with what his colleagues are saying. Austrian Martin Kocher stressed on Tuesday (March 10) that the ECB retains “full discretion” in its decision-making, while Yannis Stournaras of Greece argued for flexibility. ECB President Christine Lagarde, French Francois Villeroy de Galhau and Latvian Martins Kazaks said the bank would not allow inflation to take root again.
Despite the uncertainty, Kažimír is “relatively optimistic” about economic growth and is not too concerned about the possibility of stagflation. He warned governments against using costly measures to protect consumers and businesses from expensive energy, as public finances in some eurozone member states are strained.
“There is no doubt that governments will come up with ideas on how to offer at least some help. I would strongly discourage them from doing so and push for the measures to be very targeted and strictly time-limited. But that has never happened in the past,” Kažimír recalled.
Financial markets are pricing in a rate hike by the ECB in June or later, according to Bloomberg, counting on rising energy prices due to the conflict in the Middle East to force the bank to act. On Monday (March 9), they lowered their expectations to two quarter-percentage point increases in 2026 after Donald Trump said the war could end soon. However, after Kažimír's comments, investors have increased their bets on higher rates, and the probability of this happening by June has risen to 60%.odkaz na stránku |
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