“Our measures are an attempt to limit secondary effects, so that – when the negative supply shocks disappear – inflation will also decline rapidly,” says Mārtiņš Kazāks, Governor of Latvijas Banka and member of the Governing Council of the ECB.
“Our main task is to maintain a stable level of prices and we will do everything necessary to achieve this goal,” recalled Mārtiņš Kazāks in an interview for “Obserwator Finansowy”. The interview took place on 10 June behind the scenes of the conference “Monetary Policy in a New European Reality”, where representatives of the central banks of the Three Seas countries were debating.
We asked if the central banks can control inflation without major damage to economic growth and whether the current inflation is more cost-push or demand-pull inflation.
“It is obvious that inflation is primarily driven by supply shocks caused by Russia’s aggression against Ukraine, translating into rising energy and food prices, but it also has a slightly wider dimension, which increases the risk of secondary effects,” answered Mārtiņš Kazāks. “It won’t be easy to remedy the situation. We are faced with many threats and this is why we must respond both cautiously and flexibly.”
We also spoke about whether Latvia’s membership in the euro area in itself increases the level of both political and economic security, and about the economic outlook for the Three Seas countries during the ongoing war in Ukraine.