Slovakia Euro Entry Might Make ECB More Hawkish
One effect of this might be to make the ECB more hawkish. This is for two reasons. One is that if Slovakia is included then average growth and and therefore also inflation (because of the Balassa-Samuelsson effect) will increase, which means that the ECB will have to push interest rates higher to reach the inflation target, while feeling less pressure to ignore it for short-term growth considerations. The second reason is highlighted today by the Wall Street Journal, namely that the Slovakian central bank governor Ivan Sramko, who will join the ECB governing council, is considered to have relatively hawkish views on monetary policy.