ECB’s Kazaks says no rush for more rate hikes as risks ease

European Central Bank Governing Council member Martins Kazaks said on Sunday that there is currently no need for multiple rate hikes "in a rushed way," noting that the probability of negative economic scenarios in the eurozone has "fallen massively."x+1

The comments from Latvia's central bank chief come as oil prices have dropped back to pre-war levels following the US-Iran ceasefire agreement signed on June 17, removing a key driver of the inflationary pressures that prompted the ECB to raise rates earlier this month.

Oil's Retreat Changes the Calculus

Brent crude briefly fell below $72.48 per barrel last week — the price recorded the day before the US and Israel launched strikes on Iran on February 28 — before settling around $73, according to the BBC. The decline followed the reopening of the Strait of Hormuz under the terms of a US-Iran memorandum of understanding.bbc+1

The collapse in energy prices has already prompted economists to scale back rate-hike expectations. Bloomberg reported on June 25 that Oxford Economics no longer anticipates any further increases beyond the June hike, citing the curtailed inflation surge. Market pricing now implies an 89% probability that the ECB will hold rates steady at its July 23 meeting, according to ECB Watch data.ecb-watch+1

A Gradual Approach

Kazaks's remarks are consistent with his messaging since the June 11 rate increase, when the ECB unanimously lifted its deposit facility rate by 25 basis points to 2.25% — the first hike since September 2023. Days after that decision, Kazaks said the ECB "can move gradually" and signaled reduced urgency now that geopolitical tail risks had diminished following the US-Iran deal.ecb.europa+2

Before the war's de-escalation, a Bloomberg survey in May had projected two quarter-point hikes in 2026 — in June and September. Most analysts still expect a second increase at the September 10 meeting, when updated staff projections will be available, though the case for it has weakened with falling energy costs.bloomberg+2

Broader Context

The ECB raised its inflation forecasts at the June meeting to 3.0% for 2026 and 2.3% for 2027, driven by the energy shock from the Iran war. However, the rapid normalization of oil markets — with Brent now trading roughly where it was before hostilities began — has undercut the adverse scenarios that underpinned the tightening rationale. Kazaks's latest intervention suggests the Governing Council is content to pause and assess incoming data before committing to further action.ecb.europa