ECB's Kazimir says markets may still be underestimating the monetary policy path required

• Question is increasingly not whether further ECB action is needed, but by how much.
• Policymakers should act before elevated inflation becomes normalised, rather than waiting for price pressures to broaden and businesses to pass on higher costs.

Kazimir sits on the hawkish end of the Governing Council and has consistently led rather than followed the committee's hawkish drift, so remarks of this kind from him are more useful as a signal of where the debate is heading than of where the median voter currently stands. The notable shift in framing is from whether to tighten further to by how much: in past tightening cycles this kind of wording has preceded upgrades to the projected terminal rate rather than changes in the near-term pace, which bears more on the belly and back end of the curve than on the next meeting. The argument about acting before inflation becomes normalised, and before cost pass-through broadens, is the classic pre-emption case hawks have used to argue for front-loaded moves, and its acceptance at the committee level has historically shown up first in larger step sizes and only later in the peak. What is worth watching is whether the same language is adopted by centrist members and by the staff projections, since hawk rhetoric alone has tended to fade without that second confirmation. The immediate tells are the tone of subsequent speakers and how the remarks sit relative to current market pricing of the terminal rate rather than the size of the next hike.