European Central Bank Governing Council member Martins Kazaks stated that the ECB would need to raise borrowing costs if rising crude oil prices feed into inflation expectations. The Latvian central bank governor said in an interview on Thursday, "Oil prices are rising, and we are seeing this gradually starting to push up inflation. If inflation expectations begin to deteriorate, then the ECB will be forced to raise interest rates." Markets and economists widely anticipate the ECB will implement a 25-basis-point rate hike at its June meeting. While some officials have hinted they have seen sufficient data to support this move, others have indicated that the economic outlook needs to deteriorate further for them to act. "Currently, financial markets are reflecting a rate hike—I can neither confirm nor deny it," Kazaks said. "We will wait and see if this materializes. But if we refer to scenario analyses and our forecasts, the current situation is slightly worse than the initial projections under the baseline scenario."
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