ECB Governing Council Member Kazaks Seeks Restrictive Policy Shift Amid Inflation Concerns

European Central Bank (ECB) Governing Council member Martins Kazaks believes that the ECB should move into restrictive policy territory, arguing that it is now appropriate to do so. In an interview with Bloomberg Television's Oliver Crook in Dublin on September 18, 2026, Kazaks said that wading into restrictive territory would be a suitable response given the euro area economy's forecasted output gap closure next year.

Kazaks, who is also the governor of the Bank of Latvia, emphasized the importance of considering second-round inflation effects from the energy price shock. He pointed out that with the economy running at capacity, higher fuel costs can more easily translate into prices and wages, citing a 3.3% euro area inflation rate in August and an ECB expectation of 3.6% in the final quarter.

Kazaks' comments extend his earlier hawkish stance on monetary policy, which he expressed to Reuters four days prior. He rejected the idea that 2.50%, described by the ECB as the upper end of a neutral range, is a ceiling for interest rates. Instead, he suggested that rates may need to move above 2.50% and argued that there is no unobservable threshold or higher bar to reach before doing so.

Other policymakers have also expressed concerns about inflation risks, with ECB board member Isabel Schnabel highlighting energy prices trading above scenarios and Slovakia's central bank governor Peter Kazimir noting that inflation risks are 'clearly tilted to the upside.' However, Ireland's Gabriel Makhlouf cautioned against raising rates too much, citing potential growth costs.

Market pricing suggests a roughly 60% chance of another ECB hike at the October 29 meeting and fully prices a move by year-end. Kazaks' comments do not change this pricing directly but narrow the space for a prolonged hold if the output gap closes as forecasted.