ECB’s Kazāks: No Need to Delay Much Longer, but Uncertainty Still High, So Must Act With Caution

13 March 2024

By David Barwick – FRANKFURT (Econostream) – The European Central Bank my soon be able to start cutting interest rates, but must act with caution in an uncertain environment fraught with risks, ECB Governing Council member Mārtiņš Kazāks said Wednesday.

In a blog post on the website of Latvijas Banka, which he heads, Kazāks said that the risks associated with cutting too soon had until recently been ‘much higher’ than the risk attached to waiting. However, the risks ‘are now beginning to level out and there is no need to delay the reduction of rates too much’, he said.

If the economy develops in line with projections, ‘then the decision to start lowering interest rates could be made within the next few meetings’, he said.

‘Uncertainty remains high, so some caution is still necessary’, he said. The increase in surprisingly low natural gas prices could feed inflation, while wage growth remained high, he observed.

‘Therefore, as before, we will base our decision-making in the ECB Council on a cool mind and current data’, he said. ‘The dragon of inflation is pinned to the ground, a little more and it will be defeated.’

Inflation risks were balanced, whereas risks to growth were tilted to the downside, he said.