ECB’s Kažimír on Rate Cut Timing: ‘Whether in April or June, Is Secondary’; June Likelier

29 January 2024

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Peter Kažimír on Monday said that the precise timing of the ECB’s first rate cut was not of primary importance but that June was more probable than April.

In a statement issued on the website of the National Bank of Slovakia, which he heads, Kažimír said that ‘patience is essential before making pivotal decisions concerning the timing of the cut in our interest rates’, which would be guided by incoming information and the March inflation forecasts.

‘The peak of the tightening cycle is behind us. The next move will be a cut and it is within our reach’, he said. ‘I am confident that the exact timing, whether in April or June, is secondary to the decision’s impact.’

‘The latter seems more probable, but I will not jump to premature conclusions on the timing’, he continued. ‘As soon as it is warranted, we won’t hesitate to act. We are not behind the curve; it’s more the case that the market has got ahead of events since December.’

The ECB must have a clearer picture of the medium-term outlook and must not jump to policy conclusions based on short-term developments, he said. Doing so could result in a setback in the effort to restore price stability, he said.

Rather, patience was appropriate in the context of high global uncertainty, he said.

‘We need to see if the early-year repricing delivers any surprises in the other direction’, he said. ‘Wages agreements for the coming years are still an unpredictable factor too – a cat in the bag.’

‘The risks of a premature cut, in my view, are much greater than those of acting a bit later’, he said. ‘One should always keep in mind, that we can act as swiftly and flexibly as necessary.’

Indications were positive, but the ECB still lacked sufficient data to reach a robust conclusion, making discussion of the timing of a rate cut premature, he said.