ECB’s Kažimír: Only with June Forecasts Will We Reach the Threshold of Confidence

11 March 2024

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Peter Kažimír on Monday said that the ECB’s confidence would ‘reach the threshold’ in June.

In a statement issued on the website of the National Bank of Slovakia, which he heads, Kažimír said that the ECB was making good progress toward restoring price stability, and that confidence was mounting.

‘But we’re not there yet’, he said. ‘The slowdown in inflation remains fragile. We can’t take it for granted. Upside inflation risks are alive and kicking.’

Wage growth was still much too elevated and, in the absence of higher productivity, could feed inflation, while lower gas prices ‘could easily reverse’, he said.

The green transition and fiscal policy were further inflation risks, he said.

Monetary authorities thus needed to be careful and obtain more information, he said.

‘Important pieces of the puzzle will arrive in the next couple of months’, he said. ‘We will learn a bit more in April, but only in June, with new forecast at hand, will the level of confidence reach the threshold.’

Until then, the ECB will tackle the question of ‘how to design a good easing strategy’, he said. For him, he explained, that implied ‘a smooth and steady cycle of policy easing’ and thus meant the need to be sure of the first rate cut.

‘The current picture clearly favours staying calm for the coming weeks and delivering the first-rate cut in summer’, he said. ‘A decision to cut rates now is still a premature reduction, which would be at risk of pausing or even reversing should some developments not fall into place.’

This would harm the ECB’s credibility, he argued.

‘Ultimately, the risk of undershooting our target is still significantly smaller than the risk of acting prematurely’, he said.