ECB’s Kažimír: Expectation of Two More Cuts by End-2024 ‘Isn't Entirely Misplaced’, but No Given

22 July 2024

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Peter Kažimír on Monday said that while the ECB might yet cut interest rates another two times by the end of the year, that was not a certainty.

In a statement issued on the website of the National Bank of Slovakia, which he heads, Kažimír said that 'the doors remain open to additional easing should the environment warrant and justify such action’.

‘Financial markets are betting on two more rate cuts before the year ends', he said. 'While this isn’t entirely misplaced, it should not be taken as a given or a baseline scenario.'

In Kažimír’s view, last Thursday’s decision to stand pat was consistent with ‘a gradual disinflationary trend and steady economic recovery’, whereas the June cut corresponded to policymakers’ ‘growing confidence that inflation will continue its downward trajectory from record highs'.

Developments will be bumpy, he said, pointing to the persistence of services inflation.

‘Let there be no mistake: we are on track to return to our target, but we are clearly not there yet’, he said. The risk was ‘non-negligible’ that price pressures would resurge.

It was therefore still ‘crucial to stay cautious to avoid misplaced bets and hasty decisions’, he said.

Risks to growth were on balance ‘somewhat’ on the downside, with the economic situation ‘fragile’, he said.

There was no need to rush monetary policy decisions, he said. September would bring new information, in particular macroeconomic projections, that would be the basis for a decision, he said.