ECB’s Kazāks on Spring Rate Cut Expectations: ‘I Wouldn’t Be Optimistic’

9 February 2024

By David Barwick – FRANKFURT (Econostream) – Expectations of a European Central Bank interest rate cut in March or April are optimistic, according to ECB Governing Council member Mārtiņš Kazāks on Friday.

In an interview with Latvijas Radio, Kazāks, who heads Latvijas Banka, said, ‘At the moment, there are expectations that the rates could be cut in the spring, in March or April — I wouldn’t be optimistic. I would be cautious and I would wait until the inflation story is over. Then we can safely breathe and those rates can be lowered step by step.’

The inflationary ‘dragon’ had been downed but not yet put to death, and inflation was of an ‘insidious’ nature, he said.

‘Therefore, we will need to be patient a while longer’, he said. ‘But the good news is that inflation has come down sharply and monetary policy has helped push it down. Once there is confidence that inflation has been killed, [interest] rates will come down.’

Assuming nothing leads to a resurgence of inflation, then monetary easing will start this year, he said.

‘When exactly, it will depend on what the data say, what will happen to the dynamics of inflation, what will happen to the strength of the economy’, he said.

‘We have to wait until the story of inflation is over’, he said. ‘If you hurry, inflation and also rates can start to rise again.’