European Central Bank Governing Council member, Kazaks, who is also the governor of Latvia’s central bank, has issued a strong warning about the need to keep inflation below 2% by 2026. According to ECB projections, the target inflation rate of 2% may only be achieved towards the end of 2025. Kazaks expressed his concern about any potential delays in reaching this target.
While acknowledging that there is still a level of uncertainty, Kazaks and his fellow policymakers are optimistic that disinflation is progressing, allowing for a more relaxed policy approach. However, he emphasized that this approach could change if there are persistent upward pressures on prices.
Kazaks stated, “Currently I think we are still on the path to 2% in the second half of 2025, and I would really hope that we would achieve it by that time.” He further added, “We should not prolong this issue into 2026. If data indicates that reaching our target will be delayed beyond 2025, then we may need to maintain stricter measures to prevent such outcomes.”
The ECB’s stance on inflation control is crucial for maintaining economic stability and ensuring that prices remain at a sustainable level. By keeping inflation in check, central banks can support growth and prevent the erosion of purchasing power for consumers.
Inflation above 2% can have negative consequences for the economy, leading to higher costs of living, reduced savings value, and decreased consumer confidence. It can also impact interest rates, investment decisions, and overall economic performance.
As such, the ECB’s commitment to limiting inflation to 2% by 2026 is essential for fostering a healthy economic environment in the Eurozone. By closely monitoring price developments and adjusting policy measures as needed, central banks can mitigate the risks associated with inflation and support long-term economic growth.
It is crucial for policymakers to remain vigilant and proactive in addressing any potential challenges to achieving the inflation target. By taking timely and appropriate actions, the ECB can help ensure price stability and contribute to a resilient and prosperous economy for the years to come.